Oil futures took a hit early Wednesday as the U.S. dollar remained strong, leading traders to downplay concerns of a potential conflict in the Middle East that could disrupt crude supplies.
Price Moves
- West Texas Intermediate (WTI) crude for February delivery fell $1.51, or 2.1%, to $70.89 a barrel on the New York Mercantile Exchange.
- March Brent crude, the global benchmark, dropped $1.52, or 1.9%, to $76.77 a barrel on ICE Futures Europe.
Market Drivers
Despite remaining on edge, oil prices have yet to break out from a three-week trading range, indicating a fragile market, according to Peter Cardillo, chief market economist at Spartan Capital.
Cardillo noted that a full escalation of the conflict in the Middle East could disrupt the supply chain and cause oil prices to soar.
However, traders have largely disregarded the threat of supply disruptions, even after a U.S.-led coalition launched strikes against the Houthis following their refusal to cease attacks on shipping.
The strength of the U.S. dollar, as measured by the ICE U.S. Dollar Index, reached a one-month high after Federal Reserve Gov. Christopher Waller stated that there would be no rush to implement interest rate cuts in 2024.
A stronger U.S. currency can raise the price of dollar-priced oil for overseas buyers.
In additional news, official data released on Wednesday showed that the Chinese economy grew by 5.2% in 2023, surpassing the government’s target of “about 5%,” driven by growth in the fourth quarter.