Crude prices were mostly lower in choppy trading on Monday as the US dollar gained against a basket of foreign currencies on better than expected earnings data.
Light sweet crude for August delivery most recently fell 80 cents or 1.57% to trade at $50.10 a barrel on the New York Mercantile Exchange. Based on the most active contracts, this is the lowest the US benchmark has traded since April 8.
The August front month contract expires on Tuesday.
Brent for September delivery, the global benchmark, most recently traded 55 cents or 0.96% lower at $56.55 a barrel on the ICE Futures Exchange in London.
This is despite a marked rise in crude consumption this year.
“The surprising strength in demand, together with opportunistic stock-building, absorbed more of the global crude oil surplus than we had expected in the first half of the year,” Bank of America Merrill Lynch told the Wall Street Journal.
Most of the traders’ attention turned to the stream of corporate data in a bit to predict the possible timing of the Federal Reserve’s interest hike.
The Federal Reserve Chairwoman told the US congress that the Fed was in line to hike the country’s lending rates this year if the economy expands s it is widely expected to.
Before reversing most of its early morning gains, the greenback jumped to its highest on expectations of higher US lending rates sending copper and gold futures to multiyear lows.
The dollar gained against most other major currencies after better than expected corpora data for the second quarter raised expectations that the rate hike would happen sooner than expected.
A stronger dollar is bearish for the demand of commodities denominated in dollars like gold as it makes them more expensive to holders of foreign currencies.
Higher lending rates are also expected to curb liquidity probably increasing price measures on crude.
“The complex is seeing selling pressures amidst further dollar strengthening that is prompting broad-based commodity liquidation,” Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, told Reuters in a research note.
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