Oil pulls back from multi-month highs as strong dollar dents demand

Oil prices edged lower in early Asian trading on Wednesday, as a stronger dollar curbed investor appetite while traders took some money off the table after benchmarks rallied to multi-month highs in each of the past two sessions.

Brent crude futures for May delivery fell 19 cents, or 0.2%, to $87.19 a barrel by 0104 GMT. U.S. West Texas Intermediate futures for April delivery, which expire on Wednesday’s settlement, fell 35 cents, or 0.4%, to $83.12 a barrel.

Weighing on Asian buyer sentiment, the U.S. dollar index climbed higher for the fifth-straight session after recent data pointed to a resilient U.S. economy. A stronger dollar makes oil more expensive for investors holding other currencies, dampening demand.

Both Brent and WTI settled at their highest levels since late October in the previous session as market participants assessed the impact on crude and petroleum supplies from Ukrainian drone attacks on Russian refineries.

A drop in Russian refining capacity as a result of the strikes has led to an increase in crude oil exports from the country, trade sources told Reuters on Tuesday. Oil exports from Russia’s western ports will increase by almost 260,000 barrels per day in March over an initial monthly plan to 2.22 million bpd, they said.

Despite the rising exports, crude storage constraints could still force Russia to cut output, StoneX energy analyst Alex Hodes said. The American Petroleum Institute reported U.S. crude oil and gasoline stockpiles fell last week, while distillate inventories rose, according to sources. A Reuters poll of analysts expected stocks to rise by about 10,000 barrels last week. [API/S] Official stockpile data from the U.S. Energy Information Administration is due at 1430 GMT on Wednesday.