Oil Prices Fluctuating Amid China’s Economic Concerns and Dollar’s Rise

Oil Prices Fluctuating: After seven weeks of rising, oil prices fluctuated on the trade floor. Rising concerns about China’s delayed economic recovery and the dollar’s rise offset the tight grip of OPEC+ supply curbs. Oil prices dropped temporarily.

By 3:30 GMT, Brent oil had dropped 73 cents, or 0.84 percent, to $86.08. West Texas Intermediate crude slid 71 cents to $82.48, competing with other items whose prices were also down.

In July, U.S. producer prices rose somewhat more than in June, and the dollar remained rising, gaining territory and exhibiting its strength. Even though most people felt the Fed was done raising interest rates, Treasury yields rose unexpectedly. The dollar’s recent surge has dampened oil demand, making it difficult for individuals with other currencies to buy it.

Despite expectations, the oil market has been “overbought” for a long period. A narrow US focus on economic positive has generated this. Due to this, eurozone storms and China’s massive headwinds are being overlooked. The oil market has defied expectations. Vandana Hari, founder of the oil industry data center Vanda Insights and a well-known businesswoman, wisely suggests that the US market may soon face reality.

Image: Oil rig

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Due to China’s delayed economic recovery and the rising U.S. dollar, oil prices may remain in a limited range. This could happen with this combination. OPEC and its friends remain steadfast. They’ve made it obvious they’ll use all their tools to control supply and the market. Tina Teng, a savvy CMC Markets specialist, offered us this future message.

OPEC+ supply restrictions, orchestrated by Saudi Arabia and Russia, could deplete oil reserves for the rest of the year and raise prices. The International Energy Agency (IEA) said in its latest monthly report that this targeted effort will soon deplete oil inventories. Because availability is tightening.

The price difference between Brent’s first and second months has remained at 67 cents. This shows the tight market. I remember the enormous difference in March.

A recent Black Sea occurrence has escalated geopolitical worry in this delicate economic dance. Russian warship warning shots at a cargo ship escalated a perilous situation. This area exports most Ukrainian and Russian commodities.

Meanwhile, US oil rigs appear to be recovering. 525 rigs have remained for a week. They lost every week for eight weeks before this. Baker Hughes’ weekly report elaborates.

Our Reader’s Queries

Why is oil fluctuating?

Oil prices are subject to the laws of supply and demand, just like any other commodity, stock, or bond. If the supply of oil exceeds the demand, prices will decrease. Conversely, if the demand for oil surpasses the supply, prices will rise.

Is oil expected to go up or down?

Our analysis predicts a rise in the Brent crude oil spot price, with an expected increase from $78/b in December to $84/b in the first half of 2024. This is due in part to the recent OPEC+ production cuts. However, despite these cuts, we have revised our forecast for the Brent price in 2024 to a lower level.

Why are oil prices rallying?

The pandemic caused a major disruption in the oil markets, leading to a significant drop in U.S. oil production by 3 million barrels per day. However, the demand for oil bounced back quicker than anticipated, while the supply struggled to keep up. This resulted in an imbalance that triggered a surge in oil prices, which persisted for the next two years.

Why has oil price suddenly dropped?

On Thursday, oil prices hit a six-month low due to concerns over weak energy demand in the US and China. Despite US output remaining at record highs, investors remain worried. Brent crude futures fell by 25 cents to $74.05 per barrel.

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