Oil prices drop as Saudi supply risks abate, stronger dollar
Oil prices fell on Tuesday, reversing earlier advances, on withdrawing
fears of a supply interruption in Saudi Arabia, the world’s biggest oil
exporter, after an attack on its export facilities, and on concerns a stronger
U.S. dollar would crimp demand.
Prices rose earlier on outlooks of a regaining in the global
economy after the U.S. Senate approved a $1.9 trillion stimulus bill and on a
likely drawdown in crude oil inventories in the United States, the world’s
biggest fuel consumer.
Brent crude futures for May fell by 46 cents, or 0.7%, to
$67.78 a barrel by 0736 GMT, after earlier rising to a session high of $69.
U.S. West Texas Intermediate (WTI) crude for April slipped
by 52 cents, or 0.8%, to $65.53, after earlier rising to as high as $65.68.
“Crude prices are deteriorating as the strong dollar trade
shows no signs of weakening,” said Edward Moya, senior market analyst at OANDA.
“The enormous stimulus that is about to get passed in the
U.S. will continue to drive inflation expectations higher and that will mean a
stronger dollar in the short-term will weigh on commodities.”
Dollar-denominated oil prices typically fall when the
greenback strengthens since the commodity becomes more expensive for buyers
paying in other currencies.
U.S. Treasury Secretary Janet Yellen said on Monday that
President Joe Biden’s $1.9 trillion coronavirus aid package will provide enough
resources to fuel a “very strong” U.S. economic recovery. The House of
Representatives must still pass the Senate version of the package for it to
become law.
Brent prices have pulled back from Monday’s high above $70
per barrel. Prices rose after Yemen’s Houthi forces fired drones and missiles
at the heart of the Saudi oil industry, including a Saudi Aramco facility at
Ras Tanura vital to petroleum exports.
Riyadh said there were no casualties or loss of property.
The United States expressed alarm at “genuine security
threats” to Saudi Arabia from Yemen’s Iran-aligned Houthis and elsewhere in the
region, and said it would look at improving support for Saudi defences.
The attacks came after the Organization of the Petroleum
Exporting Countries (OPEC), Russia and their oil producing allies, known as
OPEC+, agreed last week agree on broadly sticking with output cuts despite
rising crude prices.