Oil prices dipped on Thursday, facing pressure from a stronger U.S. dollar. Traders grew uncertain about the path of inflation and interest rates, while a surprise increase in US crude inventories raised concerns about sluggish demand.
Profit-taking after June gains
Crude prices also saw some profit-taking after fears of supply disruptions in Russia and the Middle East had driven strong gains earlier in June. Brent oil futures for August delivery dropped 0.4 percent to $84.91 per barrel, while West Texas Intermediate crude futures fell 0.4 percent to $80.56 per barrel.
Unexpected build in U.S. inventories
U.S. crude inventories unexpectedly grew by about 3.6 million barrels in the week to June 21, exceeding expectations for a 2.6 million barrel drawdown. More worryingly, gasoline inventories surged by 2.7 million barrels, indicating weak fuel consumption despite the summer travel season. This inventory build heightened concerns that U.S. fuel demand was slowing, especially with elevated inflation and interest rates.
Dollar strength weighs on prices
The strong U.S. dollar, which hit a two-month high this week, also weighed on oil prices as traders favored the greenback ahead of key economic data releases. Upcoming figures include a revised Q1 GDP reading and the PCE price index – the Federal Reserve’s preferred inflation gauge. These reports will factor into expectations for future interest rate moves.
Eyes on U.S. Presidential debate
Markets were also looking ahead to the first U.S. presidential debate between President Joe Biden and former President Donald Trump later on Thursday.
Read more: Oil prices dip amid lingering demand concerns, U.S. inventory build
June gains amid geopolitical risks
Despite this week’s weakness, oil prices remained up around 4 percent for the month of June overall. Traders have priced in a higher risk premium for crude amid geopolitical tensions in Russia and the Middle East. Additionally, steady supply cuts by OPEC and its allies are expected to provide support for prices in the coming months.
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