Oil prices settle flat after testing three-week lows
NEW YORK (Reuters) – Oil prices settled little changed on Tuesday after slumping to three-week lows as the U.S. dollar climbed and signs of weaker petroleum demand in China weighed the market down for a second day.
Benchmark Brent crude LCOc1 settled up 7 cents a barrel at $50.80, after retreating to $50.02 during the session. U.S. light crude settled down 4 cents at $47.55, off a session low of $47.02, the lowest since July 25.
Brent and U.S. crude reached two-month highs in early August but have slid over the last few days, dropping more than 2.5 percent on Monday.
The dollar rose to its highest in nearly three weeks against a basket of major currencies, pressuring crude prices. A stronger dollar makes oil more expensive for buyers using other currencies. Some investors turned to oil and gold as safe haven investments last week as tensions rose between the United States and North Korea.
Chinese oil refineries operated in July at their slowest daily rates since September, official data showed. The drop was steeper than expected, raising concerns over the state of Chinese demand and the level of domestic stocks.
“People are taking a hard look at what the balance is,” said John Kilduff, a partner at Again Capital LLC. “We had seen in the past few weeks that demand growth was robust, and this turned that on its head.”
Ample supply from big oil exporters, including members of the Organization of the Petroleum Exporting Countries and the United States, also encouraged investors to sell long positions bought in July during a period of rising prices, analysts said.
The American Petroleum Institute will issue its weekly U.S. oil inventory data at 4:30 p.m. EDT, ahead of the U.S. government’s official report on Wednesday.
Analysts polled by Reuters forecast that data would show U.S. crude stockpiles fell for a seventh consecutive week, along with a probable drop in distillate and gasoline inventories.
“The focus remains on OPEC, U.S. inventories and disappointing China demand,” said Hans van Cleef, senior energy economist at Dutch bank ABN Amro in Amsterdam. “Those concerns have triggered profit-taking after a strong run-up in July.”
Efforts by OPEC and other producers to limit output have helped lift Brent past $50 a barrel, but production elsewhere, particularly in the United States, has pressured prices.
If U.S. crude falls below $47.00 a barrel and Brent crude breaks below $50.00 a barrel, prices could test lows from June, Kilduff said.
“We’re on the precipice of a large sell-off,” he said.
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