NEW YORK: Oil prices edged lower on Tuesday, weighed down by a strengthening U.S. dollar as investors remained concerned about the financial crisis in Turkey.
Brent crude dipped 15 cents to settle at $72.46 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 16 cents to close at $67.04 a barrel.
Futures extended losses in post-settlement trade after data from industry group the American Petroleum Institute showed that U.S. crude stocks unexpectedly rose by 3.7 million barrels last week, compared with analysts’ expectations for a decrease of 2.5 million barrels.
Earlier in the session, oil prices rose, supported by gains in equity markets, but pared gains at mid-day as the U.S. dollar index touched its highest since late June 2017. A stronger dollar makes greenback-denominated oil more expensive for holders of other currencies.
“Usually when the dollar starts making highs, it’s probably a sign that we’re still concerned about the Turkish situation,” said Phil Flynn, analyst at Price Futures Group in Chicago. “There’s still a bit of nervousness on the global stage.”
U.S. stock indexes broadly gained and Turkey’s lira recovered, a day after crashing to an all-time low against the dollar, feeding worries that the country’s crisis might spread to other emerging markets..
“The equities and the U.S. dollar are keying primarily off of the unfolding saga in Turkey and although the lira has posted a significant rebound today, the standoff between Turkey and the U.S. is showing no sign of progress,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
“Consequently, worries over contagion are apt to increase in the process of reducing risk appetite and renewing downside pressures on oil pricing.”
Oil’s losses were capped by concerns over lower global crude supply from top producers. The Organization of the Petroleum Exporting Countries said on Monday that Saudi Arabia had cut production. Export declines from Iran also are expected as Washington re-imposes sanctions.
But OPEC expects oil supply by countries outside the cartel to increase by 2.13 million bpd next year, 30,000 bpd more than forecast last month, boosted by new U.S. shale production.
“We do have a tighter fundamental picture right now than we had a year ago,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. “You continue to see signs that demand is pretty robust.”
However, some analysts say trade disputes between the United States and China and turmoil in emerging markets could curb energy demand.
China’s economy is showing signs of cooling with investment in the first seven months of the year slowing and retail sales softening, data showed.