Oil falls from three-year high on strong dollar, hike in UK COVID cases

Crude oil prices fell nearly 2% from their highest level in three years on Thursday as the dollar strengthened after the U.S. Federal Reserve signaled it might raise interest rates as soon as 2023.

Oil demand worries resurfaced after new coronavirus cases jumped in Britain, while supply concerns over the return of Iranian barrels also weighed on the market.

Traders, however, said Friday’s presidential elections in Iran could scuttle nuclear talks between Washington and Tehran and leave U.S. sanction on Iran’s oil exports in place.

Brent futures fell $1.31, or 1.8%, to settle at $73.08 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $1.11, or 1.5%, to settle at $71.04.

Wednesday, Brent settled at its highest since April 2019 and WTI at its highest since October 2018. Even though Thursday’s declines were the biggest daily percentage drops since May, both benchmarks were still up over 40% so far this year.

The U.S. dollar strengthened to its highest since mid April against a basket of other currencies (.DXY) after the Fed signaled it might raise interest rates at a much faster pace than assumed.

A firmer greenback makes oil more expensive in other currencies, which could dent demand.

Britain reported its biggest daily rise in new cases of COVID-19 since Feb. 19 on Thursday, according to government figures which showed 11,007 new infections, up from 9,055 the day before.