Oil slips to January low as dollar soars

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(Bloomberg) – Oil fell as further dollar gains and numbers pointing to higher U.S. inventories thwarted speculation that OPEC+ would cut production.

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West Texas Intermediate fell below $78 a barrel, falling to the lowest level since early January that was hit on Monday. The U.S. currency hit a record high after a senior Biden administration official dismissed the idea that there could be a coordinated global effort to rein in the U.S. currency.

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The industry-funded American Petroleum Institute, meanwhile, reported that U.S. crude inventories rose by more than 4 million barrels last week, according to people familiar with the figures. Official data will follow later on Wednesday.

The U.S. crude benchmark remains on track to post its first quarterly decline in more than two years amid fears a global economic slowdown could hurt energy consumption as central banks hike oil costs. borrowing to control inflation. Goldman Sachs Group Inc. said commodities have been caught in a negative feedback loop of weakness, citing factors such as the dollar.

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The soaring US currency – which has been propelled by the most aggressive trajectory of interest rate hikes by the Federal Reserve since the 1980s – is making greenback-quoted commodities more expensive for most buyers . Further Fed rate hikes are on the cards, with policymakers including James Bullard reaffirming their intention to rein in price gains.

The oil slump fueled speculation that the Organization of the Petroleum Exporting Countries and its allies would cut production to halt the rout. Crude gained 2.3% on Tuesday after Reuters reported that Moscow wanted the group to cut production by about 1 million barrels a day at its Oct. 5 meeting. A host of banks, including UBS Group AG, have also argued that the alliance could reduce production.

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“Any upward price move on production cuts could run the risk of being a knee-jerk reaction as tighter financial conditions could eventually limit its upside,” said Yeap Jun Rong, market strategist for IG Asia Pte. . « The main driving force continues to revolve around growing recession risks. »

Traders were also tracking the progress of Hurricane Ian, which is expected to make landfall on Florida’s west coast Wednesday night. Before that, U.S. energy companies slowed about 190,000 barrels of daily crude production, or about 11% of U.S. output from the Gulf of Mexico, according to government figures.

Widely watched time gaps have narrowed. Brent’s rapid spread — the difference between the two closest contracts — was $1.35 a barrel in discount, compared to more than $2 a month ago.

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