Crude oil price edged lower on Wednesday amid a strong US dollar and concerns over the impact of slowed global economic growth on the commodity’s demand. WTI oil has been trading below $80 since the beginning of the week; a figure that had been a steady support zone since mid-January.
US dollar strength
Crude oil price remains under pressure from the strong US dollar; an aspect observed in other commodities as well. According to Goldman Sachs, a strong US dollar and other factors have pushed commodities into a “negative feedback loop”.
The benchmark for US oil – WTI futures – remained close to the over 8-month low it hit earlier in the week. At the same time, metals such as copper and silver also edged lower as the dollar index hit a fresh 20-year high of $114.82. The rallying of the greenback makes dollar-priced assets more expensive for buyers holding other currencies. This explains the decline in crude oil demand and subsequent decline in prices.
US oil inventories
Crude oil price has also recorded a slump as the market digests the latest US oil stockpiles data. According to data published by the American Petroleum Institute (API) late on Tuesday, the amount of oil in storage facilities within the US rose by 4.150 million barrels for the week that ended on 23rd September.
Notably, there has been a build in stockpiles since late August. The latest figure beat economists’ expected rise of 333,000 and prior week’s 1.035 million barrels. The government’s official numbers are scheduled for release later on Wednesday.
The recorded build in crude oil inventories point to the heightened concerns over slowed economic growth in the US and the world at large. This aspect, coupled by the environment of high interest rates and inflationary pressures, has raised fears over oil demand destruction.