Oil prices ended lower for the first time on three sessions erasing early morning gains as the dollar strengthened on better than expected economic data.
Light sweet crude for September delivery ended down 27 cents or 0.6% at $48.52 a barrel on the New York Mercantile Exchange.
Brent Futures, the global benchmark, ended 7 cents or 0.1% lower at $53.31 a barrel on the ICE Futures Exchange in London.
“The little bounce we had seems to have dried up,” Gene McGillian, analyst at Tradition Energy in Stamford, Conn, told the Wall Street Journal.
“The stronger the dollar got, the selling pressure picked up, and that’s why the market turned lower.”
Crude prices had started higher in morning trading with market sentiment with market sentiment improved by inventory data from the Energy information on Wednesday reporting a bigger than expected decline in US stockpiles last week.
The bullish mood from the data was however quickly offset by the robust dollar.
Reports from the Department of commerce on Thursday showed that US economic growth accelerated in the second quarter with GDP growing by an annualized rate of 2.3%. First quarter growth was also increased to 0.6% from negative 0.2%.
The better than expected economic data raised expectations that the Federal Reserve would start its first monetary tightening policy in more than ten years during their next policy meeting in September.
The data also strengthened the dollar against other currencies helping it rally from a multi-month low earlier in the week.
A stronger greenback is bearish for the demand of commodities like oil denominated in dollars as it makes the more expensive to afford to holders of other currencies.
“You have a stronger dollar to deal with,” David Thompson, executive vice president at Powerhouse, an energy-specialized commodities broker in Washington, told Reuters, explaining the market’s reversal.
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