Oil prices edged lower on Wednesday, as a stronger dollar curbed investor appetite while traders took some money off the table after benchmarks rallied to multi-month highs in the previous session.
Brent crude futures for May delivery fell 16 cents, or 0.2%, to $87.22 a barrel by 0407 GMT. U.S. West Texas Intermediate futures for April delivery, which expire on Wednesday’s settlement, fell 31 cents, or 0.4%, to $83.16 a barrel. The more active May WTI contract was at $82.55 a barrel, down 18 cents.
“Profit-taking could be a reason for the downside movement today,” Auckland-based independent analyst Tina Teng said, adding that the recent price rally has been supported by improving demand outlook and signs of supply reduction.
Weighing on Asian buyer sentiment, the U.S. dollar index climbed higher for a fifth-straight session after recent data pointed to a resilient U.S. economy.
A stronger dollar makes oil more expensive for investors holding other currencies, dampening demand.
Traders looked ahead to the Federal Reserve’s interest rate announcement later on Wednesday for signs of its rate path for the rest of the year.
Both Brent and WTI settled at their highest levels since late October in the previous session as market participants assessed the impact on crude and petroleum supplies from Ukrainian drone attacks on Russian refineries.
“Supply risks surrounding Russian refined products continue to provide support at a time when the market is set to tighten following the rollover of additional voluntary cuts from OPEC+ into 2Q24,” ING analysts including Warren Patterson said in a note.
A drop in Russian refining capacity as a result of the strikes has led to an increase in crude oil exports from the country, trade sources told Reuters on Tuesday.
Oil exports from Russia’s western ports will increase by almost 260,000 barrels per day in March over an initial monthly plan to 2.22 million bpd, they said.
“If these disruptions are prolonged, it could eventually force Russian producers to reduce supply if they are unable to export all of this crude oil,” Patterson said.
“These attacks are more bullish for refined products in the immediate term.”
The American Petroleum Institute reported U.S. crude oil and gasoline stockpiles fell last week, while distillate inventories rose, according to sources. A Reuters poll of analysts expected stocks to rise by about 10,000 barrels last week.
Official stockpile data from the U.S. Energy Information Administration is due at 1430 GMT on Wednesday.
(Reporting by Florence Tan in Singapore and Shariq Khan in New York; Editing by Shri Navaratnam and Himani Sarkar)