Oil prices fell nearly 2% this evening as the dollar rose strongly against the euro, outweighing a surprise drop in US distillate stocks and overshadowing an expected cold snap.
The US Federal Reserve last night left interest rates unchanged as expected but its optimistic comments on the economy fuelled a dollar rebound. Oil prices tend to fall when the dollar rises because it makes it more expensive for buyers holding other currencies.
US crude was down $1.34 to $71.32 a barrel, while Brent shed $1.83 to $72.46. Earlier this week, oil prices closed below the psychologically important benchmark of $70 a barrel after falling nearly $10 over nine sessions but prices recovered later this week.
The rebound was prompted by declining US crude inventories, which fell by 3.7 million barrels compared with an expected drop of 1.8 million barrels. Distillate stocks, which include diesel and heating, fell by 2.9 million barrels, far exceeding forecasts for a 600,000-barrel drop.
A further drawdown in distillate stockpiles could be on the cards, after a 10-day National Weather Service forecast this week predicted unseasonably cold weather in most of the eastern US, the world's biggest regional consumer of heating oil.
