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Oil dips on stronger dollar, profit-taking signs after rally

Oil dips on stronger dollar, profit-taking signs after rally
© Reuters. FILE PHOTO: A view of the Johan Sverdrup oilfield in the North Sea, January 7, 2020. Carina Johansen/NTB Scanpix/via REUTERS /File Photo

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices edged lower on a stronger dollar and signs of profit-taking after a rally in July when investors bet on tighter global supplies and demand growth in the second half of 2023.

futures for October settled at $84.91 a barrel on Tuesday, down 52 cents or 0.6%. Front-month Brent settled on Monday at its highest since April 13.

U.S. West Texas Intermediate crude futures closed at $81.37 a barrel, down 43 cents, or 0.5%, from the previous session’s settlement, which was its highest since April 14.

“Crude is moving in a corrective phase this morning, prompted by a sharply higher and satisfying the ‘overbought’ market situation,” said Dennis Kissler, senior vice president of trading at BOK Financial.

The dollar index, a measure of the greenback against six major currencies, rose 0.40%. A stronger dollar makes crude more expensive for investors holding other currencies.

oil stocks fell by about 15.4 million barrels in the week ended July 28, according to market sources citing American Petroleum Institute figures on Tuesday. Analysts had expected a drop of 1.37 million barrels.

Gasoline inventories fell by about 1.7 million barrels, compared with estimates for a 1.3 million-barrel drop. Distillate inventories fell by about 510,000 barrels, compared with analysts estimates for a build of 112,000 barrels.

The inventory data helped crude futures tick up in post settlement trade. Brent was up 32 cents or 0.4% at $85.75, while U.S. crude futures jumped 40 cents or 0.5% to $82.22 in thin volumes.

To revive China’s private sector amid a flagging economic recovery following a protracted period of COVID restrictions, Chinese ministries, regulators and the central bank on Tuesday pledged more financing support to small businesses.

Meanwhile, data released on Monday showed manufacturing activity in the euro zone contracted in July at the fastest pace since May 2020, tempering enthusiasm.

On the supply side, this Friday’s OPEC+ meeting is expected to see Saudi Arabia roll its voluntary cuts through September, further tightening supplies.

OPEC oil output fell in July after Saudi Arabia made an additional voluntary cut as part of the OPEC+ producer group’s latest agreement to support the market, and an outage curbed Nigerian supply, a Reuters survey found on Monday.

At a conference on Monday, BP (NYSE:) chief Bernard Looney presaged oil demand growth continuing into next year and OPEC+ being increasingly disciplined.

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