Oil prices fell on Tuesday, reversing earlier gains, on receding fears of a supply disruption in Saudi Arabia, the world’s biggest oil exporter, after an attack on its export facilities, and on concerns a stronger U.S. dollar would crimp demand.
Prices rose earlier on expectations of a recovery in the global economy after the U.S. Senate approved a $1.9 trillion stimulus bill and on a likely drawdown in crude oil inventories in the United States, the world’s biggest fuel consumer.
Brent crude futures for May fell by 46 cents, or 0.7%, to $67.78 a barrel by 0736 GMT, after earlier rising to a session high of $69.
U.S. West Texas Intermediate (WTI) crude for April slipped by 52 cents, or 0.8%, to $65.53, after earlier rising to as high as $65.68.
“Crude prices are declining as the strong dollar trade shows no signs of weakening,” said Edward Moya, senior market analyst at OANDA.
“The massive stimulus that is about to get passed in the U.S. will continue to drive inflation expectations higher and that will mean a stronger dollar in the short-term will weigh on commodities.”
Dollar-denominated oil prices typically fall when the greenback strengthens since the commodity becomes more expensive for buyers paying in other currencies.
U.S. Treasury Secretary Janet Yellen said on Monday that President Joe Biden’s $1.9 trillion coronavirus aid package will provide enough resources to fuel a “very strong” U.S. economic recovery. The House of Representatives must still pass the Senate version of the package for it to become law.
Brent prices have pulled back from Monday’s high above $70 per barrel. Prices rose after Yemen’s Houthi forces fired drones and missiles at the heart of the Saudi oil industry, including a Saudi Aramco facility at Ras Tanura vital to petroleum exports.
Riyadh said there were no casualties or loss of property.
The United States expressed alarm at “genuine security threats” to Saudi Arabia from Yemen’s Iran-aligned Houthis and elsewhere in the region, and said it would look at improving support for Saudi defences.
The attacks came after the Organization of the Petroleum Exporting Countries (OPEC), Russia and their oil producing allies, known as OPEC+, agreed last week agree on broadly sticking with output cuts despite rising crude prices.
Also supporting prices, U.S. crude oil and refined product stockpiles likely fell last week, with distillate inventories seen drawing down for fifth straight week, a preliminary Reuters poll showed on Monday.
Reporting by Jessica Jaganathan; Editing by Richard Pullin and Christian Schmollinger