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Oil Prices Lower on Strong Dollar, Mixed Global Economic News
By Scott DiSavino
(Reuters) – Oil prices fell about 1% on Friday on concerns that growth in global oil demand could be affected by a strong U.S. dollar and negative economic news out of some parts of the world.
Prices fell despite signs of improving US oil demand and falling fuel stocks, which helped drive oil prices to seven-week highs the previous day.
Brent futures fell 47 cents, or 0.6%, to $85.24 a barrel, while West Texas Intermediate (WTI) crude ended down 56 cents, or 0.7%, at $80. .73.
The decline pushed WTI out of technically overbought territory for the first time in four days, while Brent futures remained overbought for the fourth day in a row for the first time since early April.
For the week, both crude oil benchmarks were up about 3% after rising about 4% last week.
The US dollar rose to a seven-week high against a basket of other currencies, as the Federal Reserve’s patient approach to reducing interest rates contrasted with more dovish positions elsewhere.
The Fed aggressively raised interest rates in 2022 and 2023 to curb rising inflation. Higher rates have increased borrowing costs for consumers and businesses, which could slow economic growth and reduce oil demand.
A stronger US dollar could also reduce demand for oil, making dollar-denominated commodities such as oil more expensive for holders of other currencies.
In the world’s biggest oil consumer, U.S. business activity hit a 26-month high in June amid a jobs recovery, but price pressures have eased considerably, giving hope that the recent slowdown in inflation is likely will be sustained.
U.S. existing home sales, however, fell for the third consecutive month in May as record prices and resurgent mortgage rates scared away potential buyers.
U.S. Energy Information Administration data released on Thursday showed that total product supplied, an indicator of oil demand, rose 1.9 million barrels per day last week to 21.1 million barrels per day. .
Despite the drop in crude oil prices, US gasoline futures rose for a fourth day to a one-month high due to increased demand during the summer season and falling inventories.
SIGNS OF MIXED GLOBAL DEMAND
In India, refineries processed almost 1.3% more crude in May than a year earlier, provisional government data showed, while the share of Russian supplies in imports to India, the world’s third-largest oil consumer, rose. .
“Signs of stronger demand in Asia also boosted sentiment. Oil refineries across the region are regaining some spare capacity following maintenance,” analysts at ANZ Research said.
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But in the euro zone, business growth slowed sharply this month as demand fell for the first time since February.
In China, the world’s second-largest oil consumer, Beijing warned that escalating friction with the European Union over imports of electric vehicles could trigger a trade war.
Geopolitical tensions contributed to the mixed picture.
The Ukrainian military said its drones hit four oil refineries, radar stations and other military objects in Russia.
The head of Lebanon’s Hezbollah this week promised an all-out conflict with Israel in the event of a cross-border war and also threatened EU member Cyprus for the first time.
In Ecuador, state oil company Petroecuador declared force majeure on deliveries of Napo heavy crude oil for export, following the closure of a key pipeline and oil wells due to heavy rain.
(Reporting by Scott DiSavino in New York, Noah Browning and Deep Kaushik Vakil in London; Additional reporting by Laila Kearney in New York and Sudarshan Varadhan in Singapore; Editing by Christian Schmollinger, Jason Neely, Christina Fincher, Louise Heavens, Leslie Adler and Marguerita choy)