Oil fell below US$72 a barrel after the Federal Reserve tilted toward tightening monetary policy, aiding the dollar and offsetting signs that the crude market is tightening.
West Texas Intermediate lost 0.9% in early Asian trading after ending Wednesday almost unchanged.
Following a regular policy meeting, Fed Chairman Jerome Powell said officials would begin talks on tapering massive asset purchases, while pencilling in two rate hikes by the end of 2023. A rise in the dollar reduces the appeal of commodities priced in the currency.
Still, the oil market continues to display signs of strength as the pandemic ebbs. A US government report showed domestic crude supplies sank last week as mobility picks up. Separately, Saudi Energy Minister Prince Abdulaziz bin Salman told a conference that the cautious approach taken by OPEC+ to reviving supply was paying off, indicating that he’s sticking to that position.
Oil has rallied this year, with WTI hitting the highest level since 2018 earlier this week, as the spread of Covid-19 vaccines paves the way for anti-virus curbs to be lifted. Even with consumption picking up and stockpiles drawing, the Organization of Petroleum Exporting Countries and its allies have returned only a small portion of supply that was taken off the market last year to rescue prices. The alliance next gathers on July 1 to set strategy.
There have also been bullish signs from Asia’s leading economies. In India, which has suffered from a brutal wave of coronavirus infections, road fuel sales rebounded in the first half of June. Meanwhile, in China, which has largely contained the outbreak, daily refining rates hit a record last month.
