Oil prices rise from near 2-mth low as dollar drop offers some relief
2024.05.01 21:09
Investing.com– Oil prices rose in Asian trade on Thursday, recovering from near two-month lows as a sharp drop in the dollar following a Federal Reserve meeting offered some relief to markets.
But gains in crude were limited, as a recent spike in U.S. inventories and crude production pushed the notion that oil markets were not as tight as initially thought. This notion was also what drove steep losses in crude this week.
Focus was also on ceasefire talks between Israel and Hamas, with any progress on that front presenting a lower risk premium for oil.
expiring in July rose 0.3% to $83.71 a barrel, while rose 0.4% to $78.73 a barrel by 20:14 ET (00:14 GMT).
Dollar drops as Fed downplays rate hike speculation
Oil prices were buoyed chiefly by a drop in the dollar, given that crude is priced in the greenback. A weaker dollar also benefits crude demand by making oil cheaper for international buyers.
The dollar sank from near six-month highs on Wednesday after Federal Reserve Chair Jerome Powell said the central bank’s next rate move will likely be a cut, although the timing of such a move remained uncertain.
Powell also noted that progress towards the Fed’s 2% inflation target had stalled, following a series of hotter-than-expected readings in recent months. This trend is expected to delay any potential rate cuts in the near term.
The prospect of rates remaining high for longer presents more headwinds for oil markets, given that it furthers the notion that economic conditions will worsen under high rates, pressuring crude demand.
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Middling purchasing managers index readings from top importer China also weighed on oil prices this week.
Oil prices battered by US inventory, production spike
Official data on Wednesday showed U.S. grew a substantially bigger-than-expected 7.3 million barrels in the week to April 26. Gasoline stockpiles also grew, while distillates had a minimal draw.
The inventory reading, which was preceded by data showing U.S. production surged past 13 million barrels per day in March, ramped up bets that oil markets were not as tight as initially thought.
Such a scenario bodes poorly for oil prices.
