Oil prices slipped in early trade on Thursday, reversing most of the previous session's gains on a stronger dollar and worries of higher global output amid slow demand growth forecasts.
Brent crude futures fell 45 cents, or 0.6%, to $71.83 a barrel by 0726 GMT. US West Texas Intermediate crude (WTI) futures declined 48 cents, or 0.7%, to $67.95.
"The primary driver of oil prices, both in the near term and looking ahead, will be the direction of the US dollar," said Phillip Nova's investment analyst Danish Lim, adding that supply and demand dynamics had put pressure on prices recently.
The dollar's recent rally has been a key downside pressure, said Lim, who expects oil markets to stay volatile, although with a bearish bias.
The US dollar surged to a one-year high, extending gains from Wednesday's seven-month high against major currencies after data showed US inflation in October increased in line with expectations. This, in turn, stoked worries of slowing demand in the United States.
The market is "a concoction of weak demand factors," with the latest worry being a rally in US 10-year Treasury yields and a surge in the 10-year breakeven inflation rate to 2.35%, said OANDA senior market analyst Kelvin Wong.
"(This) increases the odds of a shallow Fed interest rate cut cycle heading into 2025 and, overall, there is less liquidity to stoke an increase in demand for oil," he added.
On the supply and demand front, the US Energy Information Administration has slightly raised its expectation of US oil output to an average of 13.23 million barrels per day this year, or 300,000 bpd higher than last year's record 12.93 million bpd, and up from an earlier forecast of 13.22 million bpd.
The agency also raised its global oil output forecast for 2024 to 102.6 million bpd, from a prior forecast of 102.5 million bpd. For 2025, it expects world output of 104.7 million bpd, up from 104.5 million bpd previously.— Reuters
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