This Friday, oil prices fell for the second week in a row. This decline is caused in part by the rise in the U.S. dollar, but also by the prospect of an interest rate hike in the U.S.
The price of oil has now fallen sharply for two weeks in a row, while it was on track to finish this week with only a slight gap between the current price and multi-year highs.
This drop in the price of oil has been driven by the rise in the U.S. dollar, as well as expectations of an interest rate hike in the United States. This morning (9:00 GMT), Brent crude oil futures were down 64 cents, or 0.9%, at $72.44 a barrel.
This is a continuation of Thursday’s figures and shows an extended decline of 1.8%. Yet all the indicators were green on Wednesday, while Brent oil settled at its highest price since April 2019 and WTI oil settled at its highest level since October 2018.
“Oil markets retreated sharply overnight as a strengthening U.S. dollar and falling commodity prices elsewhere saw the overbought technical correction continue,” Jeffrey Halley, senior market analyst at OANDA, told Reuters.
Over the same period, the dollar surged in two sessions following the U.S. Federal Reserve‘s (Fed) decision to raise interest rates in 2023, earlier than market analysts expected. As the dollar rises, oil becomes more expensive in other currencies, which slows demand for relevant customers.
“The near-term outlook is all very positive. The question is, how high can the increase go, how much room for maneuver is there if we’re looking at an environment where interest rates are going to rise,” details Justin Smirk, an economist at Westpac.
Another cause of this drop in the price of oil: the resumption of pandemic in Britain. Indeed, the country was Thursday its highest daily increase of new cases of COVID-19 since February 19, with 11,007 new infections in one day.
In Iran, one of the country’s political negotiators announced Thursday that talks between Tehran and Washington on reviving the 2015 Iran nuclear deal were close to finally reaching an agreement. Analysts said the prospect could have also affected oil prices.
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