The expectation of weaker demand and a strong dollar before another rate increase balances supply worries
15 September 2022 - 11:29
byAlex Lawler
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
London — Oil steadied on Thursday as the expectation of weaker demand and a strong dollar ahead of a potentially large interest rate increase balanced supply concerns.
The International Energy Agency said this week that oil demand growth would grind to a halt in the fourth quarter. The dollar held near recent peaks, supported by the expectation the US Federal Reserve will continue to tighten policy.
Brent crude was down 10c, or 0.1%, to $94.00 a barrel at 8.55am GMT. US West Texas Intermediate crude fell 44c, or 0.5%, to $88.04.
“There are many forces dictating the price action in oil markets right now, with economic uncertainty right up there,” said Craig Erlam of brokerage Oanda. “The stronger dollar is potentially another headwind.”
Crude has dropped substantially after a surge close to its record highs in March after Russia’s invasion of Ukraine added to supply concerns, pressured by the prospects of recession and weaker demand.
New clashes between Armenia and Azerbaijan, an oil producer, linked to a decades-old dispute between the ex-Soviet states raised another risk to supply, though a senior Armenian official said on Wednesday a truce had been agreed.
“While challenging the $100 hurdle is currently not a dead cert, it seems that a bottom at around $90 has been found ... largely thanks to war-related supply fears,” said Tamas Varga of oil broker PVM.
Oil came under pressure from a strong dollar, which makes dollar-denominated commodities more expensive for other currency holders, ahead of a Federal Reserve meeting next week that could hike interest rates by a jumbo 100 basis points.
US crude inventories rose by a more than expected 2.4-million barrels, data showed on Wednesday — though again boosted by the releases from the Strategic Petroleum Reserve, part of a programme scheduled to end in October.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil steady as traders await Fed rate decision
The expectation of weaker demand and a strong dollar before another rate increase balances supply worries
London — Oil steadied on Thursday as the expectation of weaker demand and a strong dollar ahead of a potentially large interest rate increase balanced supply concerns.
The International Energy Agency said this week that oil demand growth would grind to a halt in the fourth quarter. The dollar held near recent peaks, supported by the expectation the US Federal Reserve will continue to tighten policy.
Brent crude was down 10c, or 0.1%, to $94.00 a barrel at 8.55am GMT. US West Texas Intermediate crude fell 44c, or 0.5%, to $88.04.
“There are many forces dictating the price action in oil markets right now, with economic uncertainty right up there,” said Craig Erlam of brokerage Oanda. “The stronger dollar is potentially another headwind.”
Crude has dropped substantially after a surge close to its record highs in March after Russia’s invasion of Ukraine added to supply concerns, pressured by the prospects of recession and weaker demand.
New clashes between Armenia and Azerbaijan, an oil producer, linked to a decades-old dispute between the ex-Soviet states raised another risk to supply, though a senior Armenian official said on Wednesday a truce had been agreed.
“While challenging the $100 hurdle is currently not a dead cert, it seems that a bottom at around $90 has been found ... largely thanks to war-related supply fears,” said Tamas Varga of oil broker PVM.
Oil came under pressure from a strong dollar, which makes dollar-denominated commodities more expensive for other currency holders, ahead of a Federal Reserve meeting next week that could hike interest rates by a jumbo 100 basis points.
US crude inventories rose by a more than expected 2.4-million barrels, data showed on Wednesday — though again boosted by the releases from the Strategic Petroleum Reserve, part of a programme scheduled to end in October.
Reuters
Asian stocks tread water as investors await Fed’s rate decision
Oil creeps higher as market braces for potential supply disruption
Growth in oil demand set to stop by year-end, IEA says
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
Firmer dollar bumps gold to two-week low
Market data — September 14 2022
JSE faces mixed Asian markets after Wall Street inches higher
WATCH: Market Report
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.