Oil up on weak dollar; US economic slowdown, tariff concerns cap gains

Oil prices extended gains on Wednesday, rising over 1 per cent, supported by a weaker dollar, but gains were capped by mounting fears of a US economic slowdown and the impact of tariffs on global economic growth. 

Brent futures rose 75 cents, or 1.08 per cent, to $70.31 a barrel at 1300 GMT, while US West Texas Intermediate crude futures gained 82 cents, or 1.24 per cent, to $67.07 a barrel. 

Crude has been supported in recent days by a weaker US dollar and the Energy Information Administration (EIA) moving away from earlier calls of strongly oversupplied oil markets this year, UBS analyst Giovanni Staunovo. 

The dollar struggled to lift off a five-month low against other major currencies on Wednesday, as traders digested tit-for-tat US-EU tariffs and a potential Russia-Ukraine ceasefire.   

The dollar index which fell 0.5 per cent to fresh 2025 lows on Tuesday, boosted oil prices by making crude less expensive for buyers holding other currencies. 

"Easing dollar counters the bearish bias of global economic slowdown, although this seems short-lived," said Priyanka Sachdeva, senior market analyst at Phillip Nova. 

However, signs of cooling inflation offered investors some respite after US consumer prices increased less than expected in February. 

But improvement is likely temporary against the backdrop of aggressive tariffs on imports that are expected to raise the costs of most goods in the months ahead. 

US President Donald Trump's economic policies so far have centered on a blitz of tariff announcements. Some have taken effect and others have been delayed or are set to kick in later. 

Markets worry that tariffs could raise prices for businesses, boost inflation and undermine consumer confidence in a blow to economic growth. 

"Fears of a US recession, weakness in US stock markets and concerns over tariffs affecting key oil players such as China, introduced additional market uncertainty and these factors could continue to fuel a bearish sentiment, putting a lid on oil prices," said Hassan Fawaz chairman and founder of brokerage GivTrade. 

Also on Wednesday, the Organization of the Petroleum Exporting Countries kept its forecast for relatively strong growth in global oil demand in 2025, saying air and road travel would support consumption. 

"Trade concerns are expected to contribute to volatility as trade policies continue to be unveiled. However, the global economy is expected to adjust," Opec said in the report. 

Opec also published figures showing a 363,000 bpd increase in production by the wider Opec+ group in February, led by a jump in Kazakhstan which is lagging in its adherence to Opec+ output quotas. 

On the supply side, US crude oil production is poised to set a larger record this year than prior estimates, at an average 13.61 million barrels per day, the US Energy Information Administration said on Tuesday. 

In the US, crude oil stockpiles rose by 4.2 million barrels in the week ended March 7, while gasoline inventories fell by 4.6 million barrels, market sources said, citing American Petroleum Institute figures on Tuesday. 

Markets now await government data on US stockpiles due on Wednesday for further trading cues.   

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