Crude Oil Market Falls as Dollar Gains Strength

By Adedapo Adesanya

The crude oil market depreciated on Friday by almost one per cent as the Dollar continued to firm on expectations that the United States Federal Reserve will speed up the pace of its interest rate hikes in an effort to tame inflation.

The price of the Brent crude futures decreased by 70 cents or 0.84 per cent during the session to settle at $82.17 a barrel, while the US West Texas Intermediate (WTI) crude futures dropped 80 cents or 0.98 per cent to $80.79 per barrel.

With this, both benchmarks fell for a third consecutive week on the back of a strengthening dollar amid worries that the US Federal Reserve will accelerate plans to boost interest rates following the country’s worst inflation since 1990.

The strong dollar weighed on crude oil on the notion it would drive down foreign demand for the dollar-denominated commodity.

It was reported that the world’s largest oil producer’s consumer inflation (CPI) surged at its fastest rate in 30 years to 6.2 per cent.

The news fueled a wave of fears in the market on the thought that both the White House and the US Federal Reserve may take action to stem the rise in prices.

Due to this, the usual supply and demand factors that have led to prices hitting their best in years have taken a back seat this week as higher interest rates would provide even further support to the dollar and even more downward pressure on oil prices.

Crude is also grappling with the possibility that the Mr Joe Biden administration might release oil from the US Strategic Petroleum Reserve to cool prices.

Meanwhile, a new forecast from the Organisation of the Petroleum Exporting Countries (OPEC) that showed world oil demand for the fourth quarter could also drop is raising additional concerns.

The Vienna-based cartel had cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day from last month’s forecast as high energy prices hampered economic recovery from the COVID-19 pandemic.

This is coming when the oil producers alongside allies including Russia, together known as OPEC+, agreed last week to stick to plans to add 400,000 barrels per day to the market each month.