Crude Oil Rallies on Weak Dollar, US Hurricane
By Adedapo Adesanya
Crude oil improved its value by more than $1 on Tuesday as the US Dollar weakened and investors debated the potential impact Hurricane Idalia, which is set to hit Florida this week, would have on energy supply and demand.
The US Dollar index dropped on Tuesday after data showed that US job openings, a measure of labour demand, fell in July.
As a result, Brent rose by $1.07 or 1.3 per cent to settle at $85.49 a barrel, while US West Texas Intermediate (WTI) went up by $1.06 or 1.3 per cent to $81.86 per barrel.
A weaker greenback makes Dollar-denominated oil less expensive for investors holding other currencies, boosting demand.
Job openings in the US dropped to the lowest level in nearly 21/2 years in July as the labour market gradually slowed, bolstering expectations that the US Federal Reserve will keep interest rates unchanged next month.
The Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department on Tuesday also showed the number of people quitting their jobs dropped to levels last seen in early 2021, indicating that Americans were becoming less confident in the labour market.
Experts said this data could encourage the US Federal Reserve to slow down interest rate hikes.
On the weather front, Hurricane Idalia was forecast to reach Category 3 strength – classified as a major hurricane before reaching Florida’s Gulf Coast in the early hours of Wednesday.
Analysts warned that the storm will likely impact fuel distribution systems and hit fuel consumption in the affected regions just ahead of the Labor Day federal holiday on September 4.
The weather system is not expected to hit major oil-producing platforms in the US Gulf of Mexico.
However, oil major Chevron evacuated some staff from three platforms in the region while production continued at Chevron-operated Gulf of Mexico oil and gas facilities.
The American Petroleum Institute (API) reported a massive 11.486 million-barrel draw in US crude inventories, compared with the previous week’s 2.418 million-barrel draw.
Analysts were expecting an inventory draw of 2.9 million barrels for the week. The total number of barrels of crude oil gained so far this year is just shy of 4 million barrels, according to API data, although there is a net draw in crude inventories since April of almost 44 million barrels.
Official government figures from the Energy Information Administration (EIA) will be posted on Wednesday.