Oil prices fall as dollar capping demand

Oil prices fell slightly on Thursday after gaining more than $3 in the previous session, with a strong dollar capping oil demand from buyers using other currencies and concerns over the faltering economic outlook clouding market sentiment.

By 0337 GMT, Brent crude futures fell 41 cents, or 0.5 per cent, to $88.91 per barrel, while the U.S. crude futures dropped by 35 cents, or 0.4 per cent, to $81.80.

Both benchmarks rebounded in the previous two sessions after reaching nine-month lows this week after a temporary dive in the dollar index and a larger than expected drawdown of U.S. fuel inventory raised hopes of a consumer demand recovery.

The dollar index went up again on Thursday, dampening investor risk appetite and stoking fears of a global recession.

The Bank of England is committed to buying as many long-dated government bonds, known as gilts, between Wednesday and October 14 to stabilise its currency after the British government's budgetary plans last week caused the sterling to fall.

Goldman Sachs cut its 2023 oil price forecast on Tuesday, citing expectations of weaker demand and a stronger U.S. dollar, but said global supply disappointments reinforced its long-term bullish outlook.

The world's biggest crude oil importer, travel during the week-long national holiday is expected to hit the lowest level in years, as Beijing's zero-COVID rules cause people to stay at home and economic woes dampen spending.

In a note on Wednesday, Citi analysts said that stringent zero-COVID measures and a weak property sector continue to cloud growth prospects.

The European Union proposed a new round of sanctions against Russia over its invasion of Ukraine, including tighter trade restrictions, more individual blacklistings and an oil price cap for third countries.

The 27 member countries of the bloc will have to overcome their own differences to implement them.