Dollar Rally Sinks Oil; Brent more than US crude

By Barani Krishnan

NEW YORK (Reuters) – A rally in the dollar sent oil prices sharply lower on Tuesday, with Brent falling more than U.S. crude as players took profits from Brent’s recent highs, traders said.

Expectations of a mid-year US interest rate hike pushed the dollar to multi-year highs, making greenback-denominated commodities more expensive for holders of other currencies. (USD/)

Brent, the global oil benchmark traded in London, settled almost 4% lower.

In New York, U.S. West Texas Intermediate (WTI) crude fell more than 3 percent, pressured by a strong dollar and expectations that data would show another record U.S. crude stockpiles last week as supply rose.

WTI fell less than Brent as players bet on a further reduction in its cut to the London benchmark after forecasts for a modest rise last week in the Cushing, Oklahoma delivery point for US crude versus the rest the country. (EIA/S)

“Dollar strength creates headwinds for oil. Brent in particular is taking it harder than WTI as people relax and profit from the difference between the two,” said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow, New York.

Brent settled at $58.39 a barrel, down $2.14, and US crude ended the session at $48.29, down $1.71.

The Brent-US crude spread (CL-LCO1=R) fell to $7.41, the lowest in months, before settling at $8.10, closer to Monday’s settlement.

The spread, which holds one of the largest trades in oil, has narrowed nearly 40 percent since hitting a 13-month high of $13 in late February.

“Brent looks increasingly strong, with a likely decline to near four-week lows expected in the next two sessions,” oil analysts at Jefferies said in a note.

Between June and January, crude oil prices fell 60 percent on fears of a global oil glut and the refusal of Saudi Arabia and other OPEC members to cut production. Last month, Brent stabilized at around $60 and US crude at around $50.

Saudi King Salman said on Tuesday that his kingdom would continue oil and gas exploration despite falling prices.

Forecasters polled by Reuters had expected the US data to show crude inventories at a ninth straight week of record highs. (EIA/S)

Industry group the American Petroleum Institute reports its weekly inventories at 4:30 pm EDT (2030 GMT) ahead of Wednesday’s official data from the Energy Information Administration.

(Additional reporting by Claire Milhench in London and Keith Wallis in Singapore; Editing by Jason Neely, Dale Hudson, Andrew Hay, David Gregorio and Meredith Mazzilli)