Oil Prices Rise: Amid Dollar Surge and Fed Announcement. Brent crude and U.S. West Texas Intermediate crude rose more than 1% as investors anticipate Federal Reserve Chair Jerome Powell’s interest rate decision, which has boosted the dollar. Brent rose 97 cents, or 1.2%, to $84.33 a barrel by 0852 GMT. U.S. West Texas Intermediate crude rose 1.2% to $79.98 a barrel, up 93 cents.
Investor anticipation of Jerome Powell’s Jackson Hole Symposium speech has boosted the currency to a 10-week high and its highest monthly gain. A strong dollar raises oil prices for foreign currency traders, reducing oil demand.
Morgan Stanley analysts highlighted recent inventory decreases. They expect crude to maintain its deficit all year. However, demand is expected to drop in 2024, which could lead to a slight oversupply in the new year. John Evans of oil dealer PVM said crude shortfalls may not continue.
Regional trends affect the oil market. Turkey and Iraq’s semi-autonomous Kurdistan regional administration have disagreed on resuming northern Iraqi crude oil exports. On March 25, Turkey halted Iraqi oil transfers through Ceyhan port after Iraq lost a lengthy arbitration battle.
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According to national media, Iran’s oil minister expects crude oil production to reach 3.4 million barrels per day by September. Despite U.S. sanctions, this prognosis stands. In related developments, American officials are considering easing Venezuela’s oil sanctions. If approved, more countries and companies can buy Venezuelan crude oil.
On Friday, Equinor (EQNR.OL) announced the start of production at the expanded Statfjord Ost field half a year early. Haitong Futures analysts said output restrictions are having less of an impact on oil prices.
Market experts are awaiting Saudi Arabia’s next move. A popular theory is that the nation would extend its voluntary oil output reduction of 1 million through October, its third month.
The global oil environment is turbulent due to U.S. Federal Reserve expectations, Middle East negotiations, and Venezuela and Iran sanctions. The next few months will depend on these complex factors and their interactions.
Our Reader’s Queries
What happens to oil prices when dollar rises?
The correlation between the price of oil and the strength of the U.S. dollar is rooted in two widely accepted principles. Firstly, oil is priced in U.S. dollars globally. Secondly, when the U.S. dollar is robust, the cost of purchasing a barrel of oil decreases. Conversely, when the U.S. dollar is weak, the price of oil increases in dollar terms.
Why are oil prices increasing?
In September 2023, the price of Brent crude, which is the standard for global oil markets, reached a 10-month high of $97/bbl. This increase in price can be attributed to production cuts by Saudi Arabia and Russia, as well as a surge in demand for gasoline and jet fuel due to China’s reopening. As a result, oil prices have been steadily rising in recent times.
Does a strong dollar make oil cheaper?
When the value of the U.S. dollar increases, the price of oil usually decreases. Conversely, when the dollar weakens, crude oil prices tend to rise. This is because oil is priced in dollars, and changes in the value of the currency can have a significant impact on the cost of the commodity. By understanding this relationship, investors can make informed decisions about when to buy or sell oil.
Will crude oil hit $100 again?
Goldman Sachs’ Asset & Wealth Management Investment Strategy Group (ISG) predicts that the price of oil will hover between $70 and $100 per barrel throughout 2024.