The US West Texas Intermediate (WTI) crude futures were down 14 cents, or 0.2%, at USD 71.06, while Brent futures were down 21 cents, or 0.3%, to USD 75.69 per barrel.

The dollar increased as statistics indicated that permits for new construction increased and US homebuilding jumped in May to the highest level in more than a year, suggesting that the housing industry may be recovering after being severely damaged by Federal Reserve rate hikes.

Oil demand is affected by a stronger dollar since it increases the cost of the commodity for customers using foreign currencies.

China, the top oil importer in the world, is experiencing a sputtering recovery, which continues to worry the market. With a smaller-than-expected 10-basis-point decrease in the five-year, China reduced its benchmark lending prime rates (LPR) for the first time in ten months in an effort to spur economic growth.

The rate cut came in response to recent economic data showing that China’s industrial and retail sectors were having trouble maintaining growth from earlier this year.

“Investors remained impatient with China’s efforts to boost economic growth. Beijing’s slow stimulus rollout is adding concerns about the weakening economy,” ANZ Research said in a client note.

The oil market was also cautious ahead of the US Federal Reserve Chair Jerome Powell’s speech, which is anticipated to shed light on potential rate changes in the largest economy in the world.

Recently, two Federal Reserve policymakers and an economist who joined the Fed’s Washington-based board stated that their top priority is to lower the country’s excessive inflation so that it may resume sustainable growth.

“We expect Fed Chair Powell to deliver a hawkish semi-annual testimony to Congress reflecting the FOMC’s median projection for higher interest rates in coming months and more resilient inflation in the near term,” ANZ Research said in the note.

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