Oil falls towards January low as dollar makes its way higher

Oil fell as further gains in the dollar and figures suggesting higher US inventories countered speculation that OPEC+ will cut production.

est Texas Intermediate slipped below $78 a barrel, falling to its lowest level since early January set on Monday. The US currency hit record highs after a senior Biden administration official dismissed the notion that there could be a coordinated global effort to contain the US currency.

The industry-funded American Petroleum Institute, meanwhile, reported that US crude inventories rose by more than 4 million barrels last week, according to people familiar with the numbers. Official dates will follow later on Wednesday.

The US crude oil benchmark remains on track to post its first quarterly decline in more than two years amid concerns that a global economic slowdown will hurt energy consumption as central banks hike borrowing costs to tame inflation. Goldman Sachs Group Inc. said commodities had entered a negative feedback loop of weakness, citing factors including the dollar.

The US currency’s appreciation – fueled by the Federal Reserve’s most aggressive rate hikes since the 1980s – is making greenback-valued commodities more expensive for most buyers. More rate hikes by the Fed are imminent and policymakers like James Bullard are reiterating their intention to tame gains.

The oil slump has fueled speculation that the Organization of Petroleum Exporting Countries and its allies will cut production to stem the flight. Crude oil rose 2.3% on Tuesday after Reuters reported that Moscow wants the group to cut production by about 1 million barrels a day at its Oct. 5 meeting. A host of banks, including UBS Group AG, have also argued that the alliance could reduce output.

“Any upward price movement due to production cuts could risk being a knee-jerk reaction as tighter financial conditions could ultimately limit its upward movement,” said Yeap Jun Rong, market strategist at IG Asia Pte. “The main driving force continues to revolve around the rising risks of a recession.”

Traders were also tracking Hurricane Ian, which is expected to hit Florida’s west coast late Wednesday. Before that, US energy companies shut down about 190,000 barrels of daily crude oil production, about 11% of US production in the Gulf of Mexico, according to the government.

Widespread time spreads have narrowed. Brent’s prompt spread — the difference between the two closest contracts — was $1.34 a barrel backwardation, compared with more than $2 a month ago.

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https://www.independent.ie/business/farming/agri-business/oil-sinks-toward-january-low-as-dollar-muscles-its-way-higher-42023117.html Oil falls towards January low as dollar makes its way higher

Fry Electronics Team

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