BUSINESS

Strong dollar and demand concerns push oil prices down

Oil prices saw a decrease of over 1% on Friday, marking the third consecutive week of falling prices. This decline was caused by the balance between concerns over oil supply and renewed economic concerns in the United States and China. Brent crude futures fell by 1.1%, or 81 cents, to $74.17, while West Texas Intermediate (WTI) U.S. crude futures dropped by 1.2%, or 83 cents, to $70.04. The US dollar gained slightly against the euro on Friday, largely due to uncertainty surrounding the US debt ceiling and monetary policy, leading investors to shift towards safe havens. This rise in the dollar’s value makes oil, priced in dollars, more expensive for non-dollar holders.

John Kilduff, a partner at Again Capital LLC in New York, stated that the lack of confidence in the economy has resulted in a retreat to the safer dollar, causing pessimism around oil demand. Concerns over a possible recession in the US, the world’s largest oil consumer, have increased due to the postponement of talks over the US government’s debt ceiling and concerns over another crisis-hit regional bank. On the other hand, China’s consumer price data for April rose at a slower pace than in March, missing expectations, while factory gate deflation led to doubts about China’s recovery from COVID restrictions and its impact on oil demand growth.

Energy services firm Baker Hughes Co reported that the US oil and natural gas rig count fell this week to its lowest in almost a year, with gas rigs experiencing the largest drop since February 2016. The market did see some support from the predicted emerging supply deficit for the second half of the year, despite Iraq’s oil minister stating that he does not expect OPEC+ to decide on further production cuts when it next meets in Vienna on June 4. OPEC’s report on Thursday stated that the producer group expects July-December demand for its crude to be 90,000 barrels per day higher than previously projected. The Organization of the Petroleum Exporting Countries (OPEC) maintained its global oil demand forecast for 2023, expecting economic risks to be offset by higher Chinese demand growth. Additionally, the market gained support after the US energy secretary signaled that the country could repurchase oil for the Strategic Petroleum Reserve after completing a congressionally mandated sale next month.

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