By Adedapo Adesanya
Oil rose by 1 per cent per barrel on Tuesday as the US Dollar index fell to its lowest in over a week after investors shifted focus away from geopolitical issues in the Middle East to the state of global economies.
The price of Brent crude futures was up by $1.04 or 1.2 per cent yesterday to $88.04 a barrel, and the US West Texas Intermediate (WTI) crude futures increased by $1.10 or 1.3 per cent to $83.00 a barrel.
According to the S&P Global data, the US Dollar index weakened after business activity in the world’s largest oil producer cooled in April to a four-month low on weaker demand.
A cheaper greenback typically lifts demand for dollar-denominated oil from investors holding other currencies.
Support for oil prices also came from the Euro Zone as data showed business activity expanding at the fastest pace in nearly a year this month.
Market analysts noted that the market has been under pressure from little to no growth out of the Euro Zone, so anything showing improvement proved supportive on Tuesday.
The market has also calmed following easing tensions between Israel and Iran following no further escalation to recent attacks. This has happened alongside nagging concerns on demand from top oil importer China.
Also, investors are awaiting US gross domestic product (GDP) figures and March personal consumption expenditure data, the US Federal Reserve preferred inflation gauge.
The outlook is that a low GDP of under 3 per cent could cool the US central bank’s nerves and provide less pressure on commodities while a stronger than 3 per cent reading could cause the Dollar to rally further, which would put more pressure on commodities.
The oil market also largely brushed off the threat of additional sanctions against Iranian oil.
The House of Representatives passed legislation over the weekend that would broaden sanctions against Iran’s oil exports to include foreign ports, vessels, and refineries that knowingly process crude from the Islamic Republic. The Senate could vote on the bill as soon as this week.
Under terms of the legislation, President Joe Biden would implement sanctions within 180 days of the bill’s passage but has the authority to waive penalties if he determines it is in the national security interests of the US.
