International oil price fell on Tuesday for a second day running as a stronger dollar dented risk-linked assets such as equities and other commodities, together with rising U.S. output, pushing the price below $69 a barrel for the first time in six days.
Brent crude futures fell 20 cents on the day to $69.26 a barrel in morning trading, having touched a session low of $68.75, while U.S. West Texas Intermediate futures dropped 51 cents to $65.05 a barrel, according to the news agency, Reuters.
European stock markets were firmly in negative territory after a recovering dollar and a drop in shares of Apple sent Wall Street to its largest one-day fall in five months the previous day.
With oil’s negative correlation to the dollar reaching its strongest in a month, even ongoing signs of robust demand for crude were not enough to ward off profit-taking following last week’s rise to three-year highs.
“I do have the feeling that market optimism pushed prices perhaps a little bit too high, but … as long as (inventories) continue to decline, for me, personally, I‘m more and more looking at a ‘buy-on-dips’ strategy, so I‘m looking for a correction lower,” Hans van Cleef, ABN Amro chief energy economist told the news agency.
Oil’s inverse relationship to the dollar, whereby a stronger currency makes it more expensive for non-U.S. investors to buy dollar-denominated assets, has reasserted itself this week.
“Correlations are funny things. Sometimes they work and sometimes they don’t. For most of 2017, the relationship between the dollar and the oil price was not obvious,” Tamas Varga, PVM Oil Associates strategist, said in a note to investors.
“This is the trend that seems to be turning, judging by yesterday’s price action and this morning’s moves. Rising US bond yields caused dollar shorts cover and as a result oil prices fell,” Varga further said.
Expectations for U.S. inventories to rise for the first time in 11 weeks may also be keeping oil under pressure, according to a preliminary poll conducted by the Reuters news service.
U.S. production is already on par with that of Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries (OPEC). Only Russia produces more, averaging 10.98 million barrels per day (bpd) in 2017.