Investing.com — Oil prices edged lower on Tuesday as a stronger dollar and fears that supply will outpace demand remain center stage, offsetting a potential supply risk from ongoing tensions in the Middle East.
At 2:30 PM ET (1930 GMT), futures closed 1% lower at $72.32 per barrel and the contract fell 1.1% to $77.20 per barrel.
Fears of a possible escalation of the conflict between Israel and Hamas came back into play after the US blamed Iran for an attack on US ships in the Red Sea by Houthi forces. But traders remained wary of charging too high a risk premium on oil due to the conflict, as it has had minimal impact on Middle East oil supplies so far.
Stronger dollar, global economic concerns weigh
The dollar rose and weighed on oil prices, despite falling Treasury yields as data pointed to weakness in the labor market, falling to the lowest level in two years.
Signs of a weakening US labor market are ahead of the data due out next Friday.
Adding to concerns about global growth, ratings agency Moody’s (NYSE:) earlier Tuesday downgraded its outlook for Chinese government credit ratings from stable to negative, in the latest sign of growing global concerns about a deepening real estate crisis in the world’s second largest economy in the world.
Skepticism about OPEC’s voluntary cuts remains
Sentiment on oil prices continued to deteriorate amid concerns that the Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, will abandon agreements made on November 30 to cut 2.2 million barrels per day early next year offline may not be enough to curb a potential supply glut.
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Russia indicated that it will take some time for the cuts agreed by the OPEC+ group to take effect, with the market wary that Moscow will try to raise the need for cuts while simultaneously producing as much as possible to meet the to finance ongoing war in Ukraine.
(Peter Nurse and Ambar Warrick contributed to this report.)
