Oil prices continued their downtrend as the dollar index rose, which gave up the previous day’s gains on rising US crude inventories and higher oil prices due to tensions in the Middle East.
Brent crude futures were down 28 cents, or 0.3 percent, at $89.95 a barrel, while U.S. West Texas Intermediate crude futures were down 18 cents, or 0.2 percent, at $85.21 per barrel.
Benchmark oil futures rose about 2 percent on Wednesday, but fell after the Wall Street Journal reported that Israel had agreed to delay the expected invasion of Gaza for the time being.
“The movements of oil markets are primarily involved with the Hamas-Israel war,” said Tina Teng, markets analyst at CMC.
Investors also noted a rise in US crude inventories, reflecting weaker demand.
According to the U.S. Energy Information Administration (EIA), US crude oil inventories (USOILC = ECI) rose by 1.4 million barrels last week to 421.1 million barrels, beating the 240,000-barrel rise expected by analysts in a Reuters poll.
“Markets remain volatile as Middle East jitters ebb and flow, but underlying fundamentals are seasonally weaker than expected with product demand in the U.S. surprisingly weak,” Citi analysts said on Thursday.
According to EIA data, US refinery output fell by 207,000 barrels per day and refinery utilization rates fell 0.5 percentage points to 85.6%.
Macroeconomic concerns continue to weigh on the outlook for oil demand, with business activity in the Eurozone falling alarmingly this month.
The dollar index also rose slightly on Thursday, putting pressure on oil prices.
A stronger dollar reduces demand for oil because it makes oil more expensive for holders of other currencies.
