SINGAPORE: Oil prices extended losses in Asia on Wednesday as a stronger US currency discouraged buying in the dollar-priced commodity and concerns over the geopolitical fallout from the downing of flight MH17 in Ukraine eased.
Israel’s operation against Hamas in Gaza continued to cause tensions, however, as UN chief Ban Ki-moon urged an end to the conflict that has entered its 16th day.
US benchmark West Texas Intermediate (WTI) for September delivery was down 39 cents at $102 a barrel in afternoon trade on the contract’s first day of trading.
Brent crude declined 18 cents to $107.15.
The dollar strengthened Tuesday against most other major currencies, especially the euro, as easing US consumer inflation data pointed to the Federal Reserve keeping a steady course on interest rates.
The pace of US inflation slowed in June, the Labor Department reported. The department’s consumer price index rose 0.3 percent last month, after a hefty 0.4 percent rise in May.
The dollar was sitting at multi-month highs against the euro in Asia on Wednesday, with DBS bank saying “there were more upside surprises in US data releases and more downside surprises in eurozone data.”
It said the euro is “also considered geographically vulnerable to geopolitical risks” with the eurozone “wedged between the Russia/Ukraine crisis and Israel’s military offensive in Gaza.”
A stronger US currency makes dollar-priced oil more expensive to holders of other units, dampening buying interest.
Tensions have eased since news Tuesday that pro-Russian rebels had handed over the black boxes from the Malaysia Airlines passenger jet that came down in eastern Ukraine with the deaths of almost 300 people.
With the US blaming Moscow-backed separatist rebels for the incident, there are fears that an escalation of the conflict and tit-for-tat sanctions could affect supplies from Russia, the world’s second biggest crude producer.
Investors are also keeping an eye on developments in the Middle East, where Israeli forces have vowed no let up in their aerial and ground assault in Gaza.