Stronger US dollar weighs on oil prices as uncertainty shrouds China demand prospects
ALBAWABA – Oil prices slipped on Tuesday, losing most of Monday’s gains, as the US dollar rose and mixed economic data from China, the world’s second-largest oil consumer, undermined the impact of Saudi Arabia and Russia’s supply cut extensions.
The United States (US) dollar rebounded after slipping to an 8-week low on expectations that the US Federal Reserve is done hiking interest rates for now.
The Bloomberg Dollar Index rose 0.24 percent to 105.4650 on Tuesday, as data released Monday pointed to a cooling labor market in the US.
Slowing job growth in the US market underscores the possibility that the Fed may not need to hike US interest rates, and that core inflation may be on track to further decelerate in the coming months.
Oil prices slip despite extended supply cuts by Saudi Arabia, Russia
Both benchmarks gained about $0.3 on Monday after Saudi Arabia and Russia reaffirmed their commitment to extra voluntary oil supply cuts until the end of the year, according to Reuters.
Brent crude futures slipped $0.47, or 0.55 percent, to $84.71 a barrel by 0431 GMT and West Texas Intermediate crude was at $80.45 a barrel, down $0.37, or 0.46 percent.
Oil prices ease on mixed China trade data as US dollar rebounds - Shutterstock
Notably, China's crude oil imports showed robust growth both year on year and month on month in October. Yet, Agence France-Presse (AFP) reported the country's total exports still contracted at a quicker pace than expected, pointing to a crunch in demand.
On the other hand, the country’s imports picked up, signalling China’s sluggish recovery may be on the mend on the heels of the various stimuli issued by the government to boost demand.
What’s next for oil prices?
Looking ahead on the supply side, markets are waiting to see how long Saudi Arabia and Russia are ready to rein in production and supply.
The weak trend in exports reflects downward pressure on the global economy that emerged in the fourth quarter, CMC Markets' Shanghai-based analyst Leon Li told Reuters.
Meanwhile, expectations of crude run reductions by China-based refiners between November and December may limit oil demand and exacerbate price declines, according to Reuters.
Moreover, concerns that a warmer-than-expected winter could curb energy and fuel demand also weighed on oil prices.
