Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Oil hovers near 2-month low as weaker dollar helps stem deep losses

Published 24/11/2022, 02:10 pm
Updated 24/11/2022, 02:10 pm
© Reuters.

© Reuters.

By Ambar Warrick

Investing.com-- Oil prices hovered near two-month lows on Thursday after easing concerns over Russian supply and a worsening economic outlook drove sharp losses this week, although weakness in the dollar on dovish signals from the Federal Reserve helped reduce some selling pressure.

Crude markets plummeted on Wednesday after the Group of Seven nations, or G7, was seen imposing a much higher-than-expected price cap on Russian oil sales. The move saw traders greatly cutting expectations that a strict price cap would have forced Moscow to drastically cut oil production, in order to avoid selling at a loss.

Weak economic data from the U.S., coupled with record-high COVID-19 infection rates in China also painted a dour picture for crude demand. U.S. business activity shrank further in November, preliminary data showed on Wednesday, as the economy faces growing headwinds from high interest rates and stubborn inflation.

Brent oil futures were flat around $85.33 a barrel, while West Texas Intermediate futures steadied at $77.94 a barrel by 21:43 ET (02:43 GMT). Both contracts plummeted over 4% on Wednesday, and settled at their weakest level since late-September.

Low trading volumes, on account of the Thanksgiving holiday in the U.S. this week, also spurred big moves in crude markets.

But dovish signals from the Federal Reserve, which weighed on the dollar, helped oil markets stabilize after steep losses. Members of the central bank voiced increasing support for a slower pace of interest rate hikes in the coming months, the minutes of the Fed’s November meeting showed.

The dollar tumbled 1% on Wednesday after the minutes, which eased some price pressure on commodities that are priced in the greenback. Growing expectations of a weaker dollar also benefit crude markets by supporting demand in countries that pay dollars for crude imports.

Still, demand-side indicators for oil appear to be weakening. In addition to the weak business activity data, U.S. gasoline inventories - a key indicator of fuel demand at the pump - grew much more than expected last week.

Overall U.S. crude inventories shrank by a bigger-than-expected margin during the past week, even as the government drew about 2 million barrels of oil from its Strategic Petroleum Reserve (SPR). The Biden administration also appears to be lowering the pace of its drawdowns from the SPR, which is at its lowest level since 1984.

Focus now turns to a meeting of the Organization of Petroleum Exporting Countries next month, to see whether the cartel will announce more supply cuts to help support crude prices.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.