Oil prices drifted lower on Wednesday, caught in the undertow of a broader global market selloff and a strengthening US dollar. As traders weighed the implications of higher supply and uncertain demand, the energy sector mirrored the unease seen across financial markets worldwide.
Brent crude futures were down 6 cents, or 0.1 per cent, at $64.38 a barrel by 9:30 AM, hovering near a two-week low hit in the previous session. US West Texas Intermediate (WTI) crude slipped 10 cents, or 0.17 per cent, to $60.46, reported Reuters.
The marginal declines reflected not just oil-specific factors but also a broader “risk-off” sentiment gripping investors.
“The risk-off tone across markets saw investors exit energy markets,” ANZ analysts wrote in a Wednesday note to clients. The selloff followed a sharp overnight drop in US tech stocks that triggered panic selling across Asia. By midweek, market volatility had surged to levels unseen since April, underscoring fears about stretched valuations and slowing global growth.
Strong Dollar Weighs on Oil Demand
Adding to oil’s woes was the relentless climb of the US dollar. The dollar index, which tracks the greenback against the euro, sterling, yen, and three other major currencies, held steady at a three-month high. The currency’s strength was underpinned by divisions within the Federal Reserve board, signalling slim chances of an interest rate cut at its December policy meeting.
A stronger dollar typically makes dollar-priced commodities like oil more expensive for non-US buyers, curbing demand. “Crude oil is trading lower … as risk sentiment shifted sharply negative, boosting the safe haven US dollar, both of which weighed on the crude oil price,” said Tony Sycamore, market analyst at IG.
Meanwhile, the American Petroleum Institute (API) added another layer of pressure, reporting a rise in US crude stockpiles for the week ended October 31. Analysts said the build-up in inventories suggested demand softness at a time when global markets were already grappling with oversupply concerns.
OPEC+ Output Plans Add to Market Anxiety
Oil traders are also keeping a close eye on the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+. The producer group announced on Sunday that it would raise output by 137,000 barrels per day (bpd) in December. However, it also signalled a pause in further production increases during the first quarter of 2026.
The pause, though meant to stabilise the market, may not have the desired effect. “The pause was unlikely to offer meaningful support to November and December prices,” analysts at LSEG observed in a note, suggesting that near-term price weakness could persist.
OPEC’s actual production in October rose by just 30,000 bpd, far below the 330,000 bpd increase recorded the previous month. The modest uptick reflected lower output from Nigeria, Libya and Venezuela, where operational challenges and political instability continue to disrupt supplies.
With equity markets in retreat, bond yields climbing, and the dollar showing few signs of weakness, oil’s near-term outlook appears uncertain. Investors are wary that the combination of strong US currency, excess supply, and cooling demand could keep crude prices under pressure for weeks to come.
