Oil prices experienced a second consecutive day of decline on Tuesday, driven by a technical correction following last week’s rally. Additional pressure came from forecasts indicating abundant supply and the strengthening U.S. dollar.
Brent crude futures dropped 28 cents, or 0.37%, to $76.02 a barrel by 0148 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude decreased by 33 cents, or 0.45%, settling at $73.23. Last week, both benchmarks saw gains for five consecutive days, reaching their highest levels since October. This was partly fueled by expectations of additional fiscal stimulus aimed at boosting China’s struggling economy.
According to Priyanka Sachdeva, senior market analyst at Phillip Nova, the current weakness in oil prices can be attributed to a technical correction. She also pointed to weaker global economic data, particularly from the U.S. and Germany, which has tempered the initial optimism. “The stronger dollar is also influencing market sentiment and appears to be limiting the upward momentum in oil prices,” Sachdeva noted.
The U.S. dollar remained firm, hovering near a two-year high it reached last week, amid uncertainty surrounding the potential tariffs under the incoming Trump administration. A stronger dollar tends to make oil more expensive for holders of other currencies.
Additionally, analysts expect that rising demand from non-OPEC countries, along with weaker demand from China, will maintain a well-supplied oil market into 2025, further capping price increases. As ING analysts observed, “The recent upward movement in crude prices seems to be losing momentum. While the physical market has tightened somewhat, the fundamentals for 2025 suggest a comfortable supply-demand balance, which should limit further price gains.”
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