Oil prices fell on Wednesday due to a stronger US currency and disappointing data from China, the world’s largest oil importer, raising demand concerns.
At 1013 GMT, Brent oil futures for August delivery were down $1.29, or 1.75%, to $72.42 a barrel. West Texas Intermediate crude (WTI) in the United States declined $1.28, or 1.84%, to $68.18.
On Tuesday, both benchmarks sank by more than 4%.
Brent’s July contract, which expires on Wednesday, and the US benchmark were on course for monthly losses of more than 9% and 11%, respectively.
On decreasing demand, China’s manufacturing activity declined quicker than predicted in May, with the official manufacturing purchasing managers’ index (PMI) falling to 48.8 from 49.2 in April. The result fell short of the expectation of 49.4.
The US dollar surged to its highest level in more than two months, making commodities more costly for customers holding foreign currencies and hurting on oil demand.
The US dollar index, which measures the greenback against six major currencies, benefited from lower European inflation and progress on the US debt ceiling crisis, which will be debated in the House of Representatives on Wednesday.
The dollar might extend its current gains if Friday’s non-farm payrolls report in the United States is higher than expected, increasing the likelihood of the Federal Reserve hiking interest rates again in June.
Market participants are preparing for the impending June 4 meeting of OPEC+ – the Organisation of Petroleum Exporting Countries and its allies, which includes Russia.
Mixed indications from major OPEC+ members on whether the cartel would opt to limit oil output further have fueled recent volatility in oil prices.
Despite the recent price drop, the outlook for oil market fundamentals remains bleak, according to PVM oil market analyst Stephen Brennock.
“The most likely action is inaction,” Brennock said, regarding the OPEC+ decision.