Crude prices retreated from their 2015 highs as the dollar strengthened against a basket of foreign currencies on strong economic data and traders mulled the outlook for crude demand with the global glut expected to grow.
Light sweet crude for April delivery most recently slipped 40 cents or 0.7% to $58.75 a barrel on the New York Mercantile Exchange after touching its highest level since December 11 on May 1.
Brent for June delivery, the global benchmark, declined by 28 cents or 0.2% to $66.18 a barrel on the London based ICE Futures Exchange.
“The market is expecting the tightening in the second half of the year,” Eugen Weinberg, analyst at Commerzbank, told Reuters.
“We argue this dynamic is hardly fundamentally sound,” he said of the market’s rally. “There has yet to be any noticeable drop in U.S. oil production.”
The Wall Street Journal Dollar Index, which tracks the greenback against a basket of other major foreign currencies, most recently edged up by 0.1%.
A robust dollar makes commodities that are denominated in dollars like oil more expensive t holders of other currencies therefore reducing demand.
Investors also continued to worry about the outlook for oil demand after China, one of the biggest importers of crude oil, released economic data today showing that its manufacturing activity slumped in April.
“That’s a negative signal for China, which has been the source of much of the increase in petroleum use over the last decade,” James Williams, an energy economist at WTRG Economics, told Market Watch.
“Any negative economic news from China is bearish for oil.”
Also weighing on crude prices were the latest signs that output was still strong including a reported increase in Libyan crude exports and data showing that Iraq shipped a record high total of 92.3 million barrels of crude oil in June.
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