US crude dips 16 cents, settling at $67.04, as dollar strengthens amid Turkey turmoil

Key Points
  • Saudi Arabia cuts output in July, raising concerns about OPEC's ability to meet global demand for crude.
  • U.S. sanctions against Iran target oil exports, threatening to leave the world short of supplies.
  • Economic slowdown tied to U.S.-China trade dispute could dent fuel demand growth.
An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices were near flat on Tuesday, supported by gains in equity markets but pressured by a strengthening U.S. dollar as investors remained concerned about the financial crisis in Turkey.

U.S. light crude was ended the session down 16 cents at $67.04, falling from a session peak at $68.37. Global benchmark Brent crude was down 2 cents at $72.59 by 2:18 p.m., after hitting a high of $73.93.

Oil rebounded early from the previous session's slide, then pared gains at mid-day as the U.S. dollar touched a 13-month high against a basket of currencies. A stronger dollar makes greenback-denominated oil more expensive for holders of other currencies.

"Usually when the dollar starts making highs, it's probably a sign that we're still concerned about the Turkish situation," said Phil Flynn, analyst at Price Futures Group in Chicago. "There's still a bit of nervousness on the global stage."

OPEC's July monthly report

U.S. stock indexes broadly gained and Turkey's lira recovered about 5 percent, a day after crashing to an all-time low against the dollar, feeding worries that the country's crisis might spread to other emerging markets.

"The equities and the U.S. dollar are keying primarily off of the unfolding saga in Turkey and although the lira has posted a significant rebound today, the standoff between Turkey and the U.S. is showing no sign of progress," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

"Consequently, worries over contagion are apt to increase in the process of reducing risk appetite and renewing downside pressures on oil pricing."

Oil drew support from concerns over lower global crude supply from top producers.

Saudi Arabia told the Organization of the Petroleum Exporting Countries that it had reduced crude output by 200,000 barrels per day (bpd) to 10.29 million bpd in July. The market also expects export declines from Iran as Washington re-imposes sanctions on Tehran.

But OPEC expects oil supply by countries outside the cartel to increase by 2.13 million bpd next year, 30,000 bpd more than forecast last month, boosted by new U.S. shale production.

Oil prices are unlikely to move below $70 a barrel: Oil expert

Market participants awaited industry data on Tuesday from the American Petroleum Institute (API) that analysts expect will show U.S. crude and gasoline inventories fell last week. The data is to be released at 4:30 p.m. EDT (2030 GMT).

Global oil demand is rising, but not as fast as supply.

Analysts say trade disputes between the United States and China and turmoil in emerging markets could curb energy demand.

China's economy is showing signs of cooling with investment in the first seven months of the year slowing and retail sales softening, data showed.