Oil rising amid collapse of dollar
2023.02.02 03:59
Oil rising amid collapse of dollar
By Kristina Sobol
Budrigannews.com – After falling in the previous session, oil prices rose on Thursday as a result of a weaker dollar and the OPEC+ decision to roll over an output cut to ease concerns about oversupply.
As of 0353 GMT, futures were up 65 cents, or 0.8%, to $83.49 a barrel, while WTI futures were up 71 cents, or 0.9%, to $77.12 a barrel.
After data from the U.S. government revealed significant increases in the inventory of crude and oil products, both benchmarks fell by more than 3% overnight.
On Wednesday, the Federal Reserve increased its target interest rate by a quarter of a percentage point, but it kept promising “ongoing increases” in borrowing costs as part of its ongoing fight against inflation.
Yeap Jun Rong, a Market Analyst at IG, wrote in a note, “Those hawkish reaffirmations from the Fed were met with rising doubts from the markets, which saw a dovish takeaway from Jerome Powell’s acknowledgement of progress in the ‘disinflationary process’ and that he is not concerned about loosening financial conditions.”
In a statement that marked an explicit acknowledgement of the progress made in reducing the pace of price increases from the 40-year highs reached last year, the U.S. central bank stated, “Inflation has eased somewhat but remains elevated.”
On Thursday, the plunged to a new nine-month low in response to the softer rate hike bets. Oil at a dollar price is less expensive for holders of other currencies when the dollar is weaker, which boosts demand.
At a meeting on Wednesday, an OPEC+ panel approved the current output policy of the oil producer group. This means that production cuts that were agreed upon last year will continue, despite concerns about Russian supply and hopes for higher Chinese demand.
To help the market, OPEC+ agreed to reduce its production target by 2 million barrels per day (bpd), or about 2 percent of global demand, from November of last year until the end of 2023.
In the midst of a Feb. 5 event, prices are also rising. The European Union imposes a ban on refined Russian goods.
Diplomats said that after delaying a decision on Wednesday due to disagreements among member states, EU nations will attempt to reach an agreement on a proposal from the European Commission to set price caps on Russian oil products on Friday.
Last week, the European Commission made the suggestion that beginning on February 5, the EU would impose a price cap of $45 per barrel on discounted products like fuel oil and $100 on premium Russian oil products like diesel.
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