Oil Drops 2%, Logs First Loss In Seven Sessions
Crude-oil futures closed lower Wednesday to break a six-session climb, pressured by a sharply stronger U.S. dollar as traders kept a wary eye on Iran and its threat to disrupt oil shipments through a key shipping channel.
Traders also awaited weekly U.S. data that are expected to show declines in last week’s crude inventories.
Crude for February delivery CL2G -1.77% shed $1.98, or 2%, to settle at $99.36 a barrel on the New York Mercantile Exchange. Year to date, crude oil futures still trade about 9% higher.
Prices had gained 1.7% on Tuesday to tally a six-session climb of 8.4%.
The risk of supply disruptions, with reports Iran has threatened to disrupt shipments through the Strait of Hormuz — a key shipping route for oil tankers — helped push crude higher on Tuesday.
“Right now, it is all about Iran,” said Michael Fitzpatrick, editor in chief of the Kilduff Report. “The European conundrum has been crowded off the headlines” as traders focus on “what will transpire over Iran’s nuclear ambitions.”
But “be extremely cautious in deciding to ride the back of this tiger, getting thrown off could mean getting eaten,” he said in a report.
Bahrain-based U.S. Fifth Fleet said it will not allow Iran to disrupt oil shipping through the shipping channel, Reuters reported Wednesday.
“Iran blockading the Strait of Hormuz would have serious implications for global oil prices, and the markets have remained jittery over the possibility,” said Richard Cochrane, IHS Global Insight Middle East and North Africa analyst.
“Nonetheless, such action would also damage Iran’s economy, and risk retaliation from the U.S. and allies that could further escalate instability in the region,” he said in an emailed note Wednesday. “Accordingly, it is not likely to be a decision that the Iranian leadership will take lightly.”
For now, strength in the U.S. dollar also weighed on dollar-denominated oil prices. The dollar index DXY +0.80% , which tracks the U.S. unit against six major currencies, rose to 80.506, from 79.792 in North American trading late Tuesday.
Myra P. Saefong and Virginia Harrison | Market Watch