Oil falters after 3-day prepayment on demand concerns and weaker dollar

Oil faltered as investors weighed concerns about global demand against tailwinds from a weaker dollar before a US inflation report will shape Federal Reserve policy and risk appetite.

est Texas Intermediate futures traded below $88 a barrel in a volatile session that followed a three-day rally of about 7 percent as the U.S. currency fell. Morgan Stanley has reduced its Brent price forecasts for this quarter and next, following a similar move by UBS Group AG earlier this week, according to a release.

Crude’s swings came amid a setback in efforts to revive an Iran nuclear deal. US Secretary of State Anthony Blinken said it was “unlikely” the US and Iran would reach a new deal any time soon, echoing comments from France, Germany and Britain and pushing back a future surge in Iranian oil supplies.

Crude oil hit its lowest level since January earlier this month as investors worried about global consumption, including top importer China, where authorities are pushing for tough anti-virus restrictions, and as the European Union prepares plans for blackouts amid an energy crisis. Still, the dollar has weakened after hitting a record last week, making commodities cheaper for overseas buyers.

“We do not expect a sustained recovery anytime soon,” Morgan Stanley analysts, including Martijn Rats, said in the statement. “A slowdown in growth across all major economic blocs has been pointing to weaker oil demand for some time, and this is now visible in oil-specific data as well. China has contributed a great deal to this.”

US inflationary pressures, due later Tuesday, will detail price pressures in August, and economists expect the headline count to decline year-on-year, partly on cheaper gasoline. Nonetheless, traders are expecting another big rate hike from the Fed next week, guided by officials who support the view.

“The drop in oil prices may have to do with repositioning ahead of US CPI pressure,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. “Even if inflation falls, it remains far too high for the Fed to respond in a decidedly less hawkish way.”

Widely observed time spreads have been volatile. Brent’s prompt spread — the difference between the two closest contracts — was $1.09 a barrel backwardation, compared with 86 cents last Tuesday and $1.47 two weeks ago.

Crude oil investors will get a key insight into the near-term market outlook later on Tuesday when the Organization of Petroleum Exporting Countries releases its monthly analysis. The producer group and its allies, including Russia, announced a symbolic supply cut at their meeting last week.

https://www.independent.ie/business/world/oil-swings-after-three-day-advance-on-demand-concerns-and-weaker-dollar-41984294.html Oil falters after 3-day prepayment on demand concerns and weaker dollar

Fry Electronics Team

Fry Electronics.com is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@fry-electronics.com. The content will be deleted within 24 hours.

Related Articles

Back to top button