Oil prices fell about 2 percent towards its 11-year low on Tuesday, as traders shrugged off growing tensions between two of the world’s biggest oil producers, and focused instead on a stronger U.S. dollar and swelling U.S. crude inventories.
The U.S. dollar hit a one-month high against a basket of currencies, rising nearly 0.6 percent by midday as traders sought safety over concerns about sluggish global growth and losses in the Chinese stock market.
An expected build in crude inventories at Cushing, Oklahoma, the delivery point of the NYMEX futures contract, also weighed on prices. The American Petroleum Institute will release its inventory data at 4:30 p.m. EDT (2130 GMT).
Global marker Brent crude prices were down 76 cents at $36.46 a barrel at 12:39 p.m. EDT (1739 GMT). Prices hit an 11-year low of $35.98 a barrel just before Christmas, capping a year where the benchmark’s value dropped by more than a third.
U.S. West Texas Intermediate (WTI) crude slipped 56 cents to $36.20 a barrel.
The oil market largely shrugged off rising political tensions in the Middle East between Saudi Arabia and Iran. Analysts said that as long as the conflict did not affect oil production in the region it would not have a consequence for oil prices.
The fundamental picture globally, however, appears to be grim, analysts say.
“The markets keep falling because globally, we’re still oversupplied,” said Carl Larry, an analyst with Frost & Sullivan. “But, the Middle East tensions still have people scared and they’re not sure if they should continue going in and selling. Prices could jump very quickly.”
A Reuters survey found that OPEC oil output fell in December, led by lower supply from Iraq. Yet, OPEC production was pumping close to record amounts, signaling few signs that producing members were choosing to reign in output that has pushed prices to 11-year lows..