(Reuters) – Oil slipped on Tuesday after two sessions of gains as uncertainty about the global economic outlook and a firmer dollar countered investor optimism about demand in China and expectations of a drop in U.S. crude inventories.
The dollar rose as worries about corporate earnings and the outlook for the global economy deepened. A stronger dollar makes oil more expensive for other currency holders and tends to reflect reduced investor risk appetite.
“A recovering dollar is weighing on sentiment,” said Stephen Brennock of oil broker PVM. “I suspect that upcoming macro releases concerning U.S. house prices and consumer confidence are also keeping buyers on the sidelines.”
Brent crude fell 70 cents, or 0.9%, to $82.03 a barrel at 1200 GMT, while U.S. West Texas Intermediate crude dropped 65 cents to $78.11. Both contracts rose over 1% on Monday.
“The general level of risk appetite has turned increasingly sour again today with losses seen across most commodity markets,” said Saxo Bank commodity strategist Ole Hansen.
Oil was up earlier in the day supported by investor optimism that holiday travel in China would boost fuel demand and by expectations U.S. inventories would show a drop in crude stocks.
Involuntary and planned supply cuts also lent support. Iraq’s northern oil exports have shown little sign of an imminent restart after a month of standstill, and members of the OPEC+ producer group are starting a voluntary cut in May.
Still, investors remain wary about central banks in the United States, Britain and the European Union potentially raising interest rates further to curb inflation, which could slow economic growth and dent energy demand.
The U.S. Federal Reserve, the Bank of England and the European Central Bank are all expected to raise rates at their upcoming meetings. The Fed meets on May 2-3.
Traders on Tuesday awaited data from industry group the American Petroleum Institute on U.S. stockpiles. Analysts expect crude inventories to fall by about 1.7 million barrels.
