The rebound in the US dollar lowers the price of oil, but the recovery in demand remains intact
Meanwhile, Iran’s bragging about impending nuclear deal fails traders: File Image / PixaBay
A long-drawn out sell-off finally took place on Thursday as oil prices fell the most in a month, triggered by a rise in the dollar affecting the sentiment of traders who had invested in commodities to hedge against inflation.
After the we The Federal Reserve signaled that its accommodative monetary policy was coming to an end soon, Brent fell by 74 cents, or 1 percent, at $ 73.65 per barrel at 01:03 GMT; West Texas Intermediate fell by 69 cents, or 1 percent, at $ 71.46 per barrel.
John kilduff, founding partner of Once again the capital, noted that “Everything to do with commodities is down significantly; this is a liquidation that has been piling up for weeks.”
This decline in oil prices is expected to be temporary
Edward Moya, Senior Market Analyst, OANDA
Edouard Moya, senior market analyst at OANDA, added: “The Fed was supposed to be on hold and interrupt this meeting, but it sent a clear message that it is ready to start talking about a cut and that means the dollar is ripe for a rebound which should be a headwind for all commodities.
“Energy markets have become so obsessed with a robust summer travel season and Iran nuclear deal talks that they have been somewhat blinded by the Fed’s hawkish surprise.”
However, the overall oil recovery remains robust and Citigroup Inc. said Brent may soon overtake $ 80 per barrel thanks to pent-up demand for recreation unleashed by highly successful global deployments of the Covid vaccination.
Moreover, despite the remarks of those responsible for Iran suggesting that a nuclear deal is about to be relaunched, Energy aspect said in a report that Tehran will likely not be able to sustain production or release stored inventory until Q4.
More encouraging news for oil on Thursday came from the Energy information administration, which revealed that U.S. crude oil inventories fell sharply last week as refineries increased operations to their highest level since January 2020, signaling continued improvement in demand.
In addition, US oil companies report that activity and prices for drilling and completing wells are increasing slightly, especially for those with specialized services or more productive equipment: “We are already starting to see a positive increase. of activity and a recovery in the prices of services, hopefully. be reflected in the coming months, ”said Stuart Wilson, general manager of Packers Plus Energy Services.
Moya concluded: “This decline in oil prices should be temporary, as fundamentals on the supply and demand side should easily be able to offset the rebound in the dollar.”