WTI Oil Prices Slip Below $72.50 as US Dollar Strengthens

West Texas Intermediate (WTI) crude oil prices dipped below $72.50 per barrel in early Asian trading on Thursday, pressured by a strengthening US Dollar. While a firmer greenback typically weighs on dollar-denominated commodities like oil, concerns over potential supply disruptions from ongoing geopolitical tensions are likely to limit downside price movement.

The US Dollar has found support recently as fears of renewed inflationary pressures in the United States have increased investor demand for the safe-haven currency. A stronger dollar makes oil more expensive for holders of other currencies, thereby reducing demand.

However, recent data from the US Energy Information Administration (EIA) revealed a seventh consecutive weekly decline in US crude oil inventories. Stockpiles fell by 959,000 barrels in the week ending January 3rd, exceeding market expectations of a 250,000-barrel decrease. This drawdown in inventories could provide some support to WTI prices.

Furthermore, the potential for further sanctions on oil exports from Russia and Iran remains a key factor in the market. The Biden administration is expected to impose additional sanctions on Russian oil exports, which could further tighten global supply and push oil prices higher.

Market participants will be closely monitoring key economic data releases this week. The Federal Reserve’s policy statements and the upcoming US employment report for December will be closely watched, as they could significantly impact the strength of the US Dollar and, consequently, the direction of WTI prices.