(Bloomberg) — Oil fell as a rising U.S. dollar weighed on commodities and concerns about demand growth dented the outlook for prices.
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The global benchmark Brent fell towards $72 per barrel, while West Texas Intermediate traded near $68. The US currency has risen to its highest level in two years in the wake of Donald Trump’s election victory. That makes commodities priced in dollars more expensive for most buyers, and the decline in crude has been accompanied by losses in other commodities, including copper.
China’s weakening profile in the global oil market remains a concern. The US Energy Information Administration said midweek that India is now the top source of demand growth in Asia as Chinese consumption falters due to slowdown and electric vehicle penetration. Further analysis will come later Thursday from the International Energy Agency.
Crude oil has alternated between gains and losses on a weekly basis since mid-October as traders weigh OPEC+ supply moves, U.S. monetary policy and risks to oil demand growth, especially in China. There are widespread concerns that the global market will turn into glut next year, with Morgan Stanley this week downgrading its price forecasts, citing the softening outlook.
“Even as Fed rate cuts accelerate, US economic resilience is keeping the dollar strong and weighing on oil,” said Charu Chanana, chief investment strategist at Saxo Capital Markets Pte in Singapore. Demand concerns remain after OPEC downgraded its growth forecasts, and as traders understand what the coming Trump presidency could mean for China’s prospects, she said.
The Middle East was also in the spotlight. According to a Washington Post report, Israel rushed to prepare a ceasefire agreement against Lebanon as the administration adjusted to the prospect of Trump’s return to the White House.
In the US, the American Petroleum Institute reported that US crude inventories fell by 800,000 barrels last week, with levels in Cushing, Oklahoma, shrinking by another 1.9 million barrels, according to a Bloomberg filing.
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