US WTI crude futures dropped 53 cents, or 0.8%, at $70.51 a barrel, after retreating 1.5% yesterday
Oil prices dropped for a second consecutive session as the US dollar soared on the prospect of interest rate hikes in the US, but they were on track to finish the week little changed and only slightly off multi-year highs.
Brent crude futures shed 64 cents, or 0.9%, at $72.44 a barrel today following a 1.8% drop yesterday. The contract is set to be largely steady for the week.
US West Texas Intermediate (WTI) crude futures dropped 53 cents, or 0.8%, at $70.51 a barrel, after retreating 1.5% yesterday and is also set to be flat on the week.
On Wednesday, Brent settled at its highest price since April 2019 while WTI settled at its highest since October 2018.
Oil markets retreated sharply overnight as a stronger US dollar and falling commodity prices elsewhere saw the overbought technical correction continue, said Jeffrey Halley, senior market analyst at OANDA.
The dollar has surged in the two sessions since the US Federal Reserve projected possible rate hikes earlier than expected, in 2023.
A rising dollar curbs demand as it makes oil more expensive in other currencies.
The prospect of rate hikes also weighed on the longer-term growth outlook, which would eventually hurt oil demand, in contrast to the near-term outlook for growth in demand as Covid-19 related curbs on movement and business activity ease and road and air travel pick up, said Westpac senior economist Justin Smirk.
The near term's all very positive. The question is how much further can it rise, how much scope is there if you're looking at an environment where interest rates are going to rise, Smirk said.
Oil prices also dropped after the UK yesterday reported its biggest daily rise in new cases of Covid-19 since February 19 as 11,007 new infections were reported compared to 9,055 a day earlier.