By Peter Nurse
Investing.com — Crude oil prices slipped lower Tuesday after the dollar climbed in response to a surge in inflation, outweighing the International Energy Agency’s warned of a potential significant tightening to the global energy markets.
By 9 AM ET, futures traded 0.4% lower at $73.84 a barrel, while the contract was flat at $75.16.
U.S. were up 0.3% at $2.2835 a gallon.
Weighing on sentiment Tuesday was the news that U.S. increased 0.9% in June, jumping 5.4% on the year. This was the largest gain since August 2008, and has resulted in a boost for the dollar as traders price in an earlier move to tighten monetary policy than previously expected.
A firmer dollar weighs on commodity prices, if they are denominated in dollars, as it makes the commodity more expensive for foreign buyers.
The latest increase comes as concerns rise about the growth of the number of cases of the Covid-19 virus, mainly in southeast Asia, but also in the U.S., the biggest consumer in the world, which recorded the highest number of cases over the weekend since May.
“The market has held an optimistic view on the demand recovery, but clearly, there are some very real risks that the recovery will not be as quick as many in the market had anticipated,” said analysts at ING, in a note.
Earlier Tuesday the International Energy Agency warned in its monthly report that the standoff between the members of the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, threatens to exacerbate a “deepening supply deficit,” with “the potential for high fuel prices to stoke inflation and damage a fragile economic recovery.”
OPEC+ is set to keep output levels unchanged next month following a dispute between Saudi Arabia and the United Arab Emirates, even as fuel consumption bounces back from the pandemic and summer driving demand peaks.
The market tightness referred to by the IEA is likely to be in evidence later, when the American Petroleum Institute is due to release its weekly estimate of . These inventories are expected to fall for an eighth consecutive week, having slipped to the lowest since February 2020 in the week to July 2.
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