Oil prices were mixed in trading on Wednesday as investors weighed the strengthening US dollar against falling US crude stocks and slowing global demand.  Shell photo.

Oil prices impacted by strength of US dollar

Oil prices were mixed on Wednesday as the rising US dollar outweighed government data that showed a larger-than-expected decline in US crude stocks.

By 1:54 p.m., EDT, benchmark Brent crude was up 30 cents to $78.73 and US WTI dropped 16 cents to $71.105/barrel.  The Canadian Crude Index was down 25 cents to $50.87.

The US dollar hit a nearly five-month high against a number of major currencies which made oil, a US dollar-denominated commodity, more expensive to buy.

“The only reason why we’re not seeing higher prices from here today is the strength of the U.S. dollar,” Tariq Zahir, managing member at Tyche Capital Advisors told Reuters.

According to the US Energy Information Administration, US crude stocks fell last week as oil exports hit a one-week record high.  EIA data also showed inventories of both gasoline and distillates dropped.

US crude inventories dropped by 1.4 million barrels last week which was much higher than analysts’ expectations of a decline of 763,000 barrels.

“All in all, the report is bullish. Oil stocks fell across the board and in some cases more than expected, whilst rising exports point to healthy demand for U.S. crude,” Commerzbank analyst Carsten Fritsch told Reuters.

Currently physical crude markets are struggling with unsold barrels of oil, and at the same time, the 50 per cent rise in oil prices in the past year has prompted major oil companies to boost their production.

Spot crude prices are at their steepest discounts to futures prices in years.  Sellers of West African, Russian and Kazakh cargoes are struggling to find buyers while pipeline bottlenecks are hindering West Texas and Canadian producers from getting their crude to market.

Also on Wednesday, the International Energy Agency warned that global oil demand will likely moderate this year as the price of oil rises and a number of importing nations stop offering consumers generous fuel subsidies.

The IEA cut its forecast for global demand growth this year to 1.4 million barrels per day (b/d), down from 1.5 million b/d.

“On balance, the report is tending more to the negative side. Demand for oil has been revised downwards for the second half of the year from April,” PVM Oil Associates strategist Tamas Varga told Reuters.