Oil prices dip as dollar soars, U.S. crude stocks rise modestly

© Reuters. FILE PHOTO: Workers walk as oil pumps are seen in the background in the Uzen oil and gas field in the Mangistau Region of Kazakhstan November 13, 2021. REUTERS/Pavel Mikheyev

By Shadia Nasralla

(Reuters) - Oil prices dipped on Wednesday as a soaring dollar made barrels more expensive and as coronavirus outbreaks cloud the economic outlook in China, the world's biggest importer of crude oil.

Separately, U.S. government data showed crude stockpiles rose modestly last week as fuel inventories declined, signalling ongoing tightness in the world's largest oil producer.

Brent crude futures fell by 4 cents to $104.95 a barrel as of 10:53 a.m. EDT (1453 GMT). U.S. West Texas Intermediate crude futures dropped 25 cents to $101.45.

The dollar rose to its highest in five years, making oil purchases more expensive for holders of other currencies. [FRX/]

"This (is) a risk off environment with a stronger U.S. dollar and mobility restrictions in the second largest oil consumer, China," said UBS commodity analyst Giovanni Stauvono.

The market clawed back some losses after the U.S. Energy Information Administration said crude stocks rose by just 692,000 barrels last week, short of expectations, while distillate inventories, which include diesel and jet fuel, fell to their lowest since May 2008. [EIA/S]

"Oil prices were lower prior to the report but are paring losses given supportive numbers, particularly for the products," said Matt Smith, lead Americas analyst at Kpler.

Energy markets worldwide are dealing with massive disruptions to supply following Russia's invasion of Ukraine and subsequent sanctions slapped on Moscow by the United States and its allies.

Moscow escalated its use of energy as a cudgel against countries opposed to the invasion this week, as Russian energy giant Gazprom (MCX:GAZP) said on Wednesday it halted gas supplies to Bulgaria and Poland.

European Commission Chief Ursula von der Leyen said Russia was using fossil fuels to blackmail the EU but added the era of Russian fossil fuels in Europe was coming to an end.

Germany, which has been reliant on Russia for its energy security, is pushing ahead with attempts to become independent of Russian gas and oil imports, facing a hit to its growth.

Germany's economy minister said plans to take control of the PCK Schwedt refinery, majority-owned by Rosneft and the last big buyer of Russian crude in Germany, were progressing.

China's central bank said it would step up monetary policy support as Beijing races to stamp out a nascent COVID-19 outbreak in the capital and avert the same type of debilitating city-wide lockdown Shanghai has been under for a month.