Oil prices have fallen in week due to strong dollar
2023.02.17 01:33
Oil prices have fallen in week due to strong dollar
By Ray Johnson
Budrigannews.com – As worries about rising U.S. interest rates and a strong dollar outweighed optimism about a possible recovery in Chinese demand, oil prices fell slightly on Friday and were expected to end the week lower.
Following a hot report that indicated that inflation will likely remain stubborn in the world’s largest economy, U.S. inflation read higher than anticipated for January.
The readings and hawkish overnight comments from Federal Reserve officials pointed to additional hikes in the coming months, which the markets feared could halt economic growth this year and impact crude demand.
By 21:13 ET (02:13 GMT), futures had fallen 0.1% to $84.55 a barrel and 0.7% to $77.97 a barrel. This week, both contracts were expected to lose between 1.5 and 2 percent.
Overnight, the jumped as both talked about more central bank interest rate hikes, which affected crude prices. Crude becomes more expensive for buyers abroad as the dollar strengthens, reducing global oil demand.
The Biden Administration’s planned sale of 26 million barrels of crude from the Strategic Petroleum Reserve earlier this week also hurt oil prices. This, in addition to data that showed a much bigger-than-expected build in the United States, pointed to a possibility of a supply glut in the United States in the near future.
Optimism over a recovery in Chinese demand, which had provided crude prices with some respite this week, was largely offset by the negative supply and monetary policy cues. In recent sessions, oil markets experienced volatile swings as they weighed a more positive demand outlook against signs of trouble in the near future.
The International Energy Agency and the Organization of Petroleum Exporting Countries both increased their annual demand projections, projecting that China’s economic recovery will account for more than half of oil demand this year.
China’s efforts to boost economic growth following three years of COVID lockdowns were also outlined this week in the form of additional spending measures.
However, despite China’s earlier this year relaxation of most COVID prevention measures, the country’s economic data has been somewhat subpar. In the world’s largest oil importer, oil bulls are waiting for more consistent signs of economic recovery.
