(Bloomberg) -- Oil fell the most in more than three weeks as traders eyed a stronger dollar and signs of weaker demand, which have triggered algorithmic selling.
West Texas Intermediate dropped 1.4% to settle below $81 a barrel on Tuesday. The dollar strengthened for a second day, making commodities priced into the currency more expensive. WTI futures have been testing their 100-day moving average, which has served as a support level for a month.
Trend-following algorithms have been poised for selling since the beginning of the week, with the window for large-scale liquidations remaining open, Daniel Ghali, a commodity strategist at TD Securities, wrote in a note to clients.
“With our gauge of global commodity demand trending notably lower, we expect downside pressures to continue to build without an additional boost to supply risk,” wrote Ghali.
In another sign of short-term cooling, key timespreads have softened in recent days. Premiums of gasoline over crude fell to the lowest in almost a month. Though still higher for the year, oil has largely swung between $75 and $95 as OPEC+ supply cuts vie with a cautious outlook for Chinese consumption.
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