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Oil Prices Ease Amid Strong Dollar and Mixed Global Economic News
Oil Prices Ease Amid Strong Dollar and Mixed Global Economic News
Oil Prices Ease Amid Strong Dollar and Mixed Global Economic News
– By Daniel Terungwa

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Oil Prices Ease Amid Strong Dollar and Mixed Global Economic News.

Crude prices dropped by about 1% on Friday, driven by concerns that global oil demand growth could be hampered by a strong U.S. dollar and negative economic developments in some regions.

Despite indications of improving U.S. oil demand and decreasing fuel inventories, which had lifted crude prices to a seven-week high the previous day, prices still fell.

Brent futures declined by 47 cents, or 0.6%, closing at $85.24 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped 56 cents, or 0.7%, to settle at $80.73.

The decline pushed WTI out of technically overbought territory for the first time in four days, while Brent futures remained overbought for a fourth consecutive day, a first since early April. Despite the drop, both crude benchmarks saw a weekly increase of about 3%, following a 4% gain the previous week.

The U.S. dollar rose to a seven-week high against a basket of other currencies, bolstered by the Federal Reserve’s cautious approach to cutting interest rates compared to more dovish stances elsewhere. The Fed had aggressively hiked interest rates in 2022 and 2023 to control inflation, leading to higher borrowing costs for consumers and businesses, which can slow economic growth and reduce oil demand. A stronger U.S. dollar also makes greenback-denominated commodities like oil more expensive for holders of other currencies, potentially reducing demand.

In the U.S., business activity reached a 26-month high in June, driven by a rebound in employment, while price pressures eased significantly, suggesting a sustainable slowdown in inflation. However, U.S. existing home sales fell for the third straight month in May, as record-high prices and rising mortgage rates deterred potential buyers.

Data from the U.S. Energy Information Administration showed total product supplied, a proxy for oil demand, increased by 1.9 million barrels per day last week to 21.1 million barrels per day. Despite the decline in crude prices, U.S. gasoline futures rose for the fourth consecutive day to a one-month high due to rising demand during the summer driving season and a drop in inventories.

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Mixed Global Demand Signals

In India, refiners processed nearly 1.3% more crude oil in May compared to a year earlier, with the share of Russian supplies in imports to India, the world’s third-largest oil consumer, increasing. Analysts at ANZ Research noted that signs of stronger demand in Asia also boosted sentiment, as oil refineries across the region resumed operations after maintenance.

However, in the euro zone, business growth slowed sharply this month, with demand falling for the first time since February. In China, the world’s second-largest oil consumer, tensions with the European Union over electric vehicle imports raised fears of a potential trade war.

Geopolitical tensions further complicated the global outlook. Ukraine’s military reported drone strikes on four oil refineries, radar stations, and other military targets in Russia. In Lebanon, the head of Hezbollah threatened full-scale conflict with Israel and for the first time, also threatened EU member Cyprus. In Ecuador, state oil company Petroecuador declared force majeure on deliveries of Napo heavy crude for export following the shutdown of a key pipeline and oil wells due to heavy rains.

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