The price of oil fell by about 1% on Wednesday, continuing yesterday's decline. Pressure on oil is exerted by the strengthening of the US dollar, concerns about demand for petroleum products in China and the risks of a slowdown in the global economy. Meanwhile, a potential reduction in oil supplies from the Middle East and Libya is supporting prices.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.30% to 100.84.
Experts said that while last week's drawdown in U.S. crude inventories is a positive for oil prices, potential production problems in Libya and a possible escalation of conflict in the Middle East remain the biggest risks to oil markets. The Libyan disruptions should tighten the oil market, considering real barrels are removed, but here investors want to see a drop in Libyan crude exports first.
Meanwhile, data from the American Petroleum Institute showed that last week crude oil inventories fell by 3.4 million barrels, after analysts predicted a 3 million barrel dip. Gasoline inventories fell by 1.86 million barrels. Analysts had predicted a smaller 1.6-million-barrel draw. Distillate inventories also saw a decrease this week, of 1.4 million barrels. Analysts had forecast a 1.1-million-barrel barrel decrease. Cushing inventories completed the draws, with a loss of 486,000 barrels, compared to the 648,000-barrel draw from the previous week. Now investors' attention is switching to official data from the U.S. Energy Information Administration (EIA), which will be published at 14:30 GMT. Economists expect oil inventories to fall by 3 million barrels.