Oil Falls as Stronger Dollar Outweighs Tight Supply, US Stockpiles Drop

Fears of renewed inflationary pressure in the US, the world’s largest economy, grew leading to a stronger US Dollar, with Brent shedding 32 cents or 0.42 per cent to trade at $77.37 per barrel and the US West Texas Intermediate (WTI) losing 47 cents or 0.63 per cent to settle at $74.72 per barrel.

A stronger Dollar makes oil more expensive for holders of other currencies, weakening prices.

According to a Reuters survey, oil output from OPEC fell in December after two months of increases with field maintenance in the United Arab Emirates (UAE) offset a Nigerian output hike and gains elsewhere in the group.

Nigeria recorded a 50,000 barrels per day gain, bringing Africa’s largest oil producer daily average to 1.5 million barrels per day.

In Russia, oil output averaged 8.971 million barrels a day in December, below the country’s target.

There was a drop in US crude stocks as the US Energy Information Administration (EIA) reported an estimated inventory draw of 1 million barrels for the first week of 2025.

The authority also estimated builds in fuel inventories but both gasoline and diesel stocks remain below the five-year average.

The crude inventory draw compared with another modest of 1.2 million barrels for the last week of 2024, which was accompanied by substantial builds in gasoline (petrol) and middle distillates that failed to elicit a bearish response from the market at the time.

This is after the American Petroleum Institute (API) inventory reported crude oil stocks shed a sizable 4 million barrels in the first week of January. The API also estimated another round of hefty inventory builds in fuels.

Analysts expect oil prices to be on average down this year from 2024 due in part to production increases from non-OPEC countries.

Market analysts note that the market remains driven by expectations of this tighter global supply situation after US President-elect Mr Donald Trump takes office on January 20.