Oil prices closed lower due to the strength of the dollar

The decline pushed US crude WTI out of the technical overbought zone for the first time in four days, while Brent futures remained in overbought territory for the fourth consecutive day, a first since early April.

Oil prices fell on Friday due to fears that global demand growth might be dampened by the strength of the dollar and negative economic news from various parts of the world.

Brent futures closed down 47 cents, or 0.55%, at $85.24 per barrel, while US West Texas Intermediate (WTI) crude futures for August delivery fell 56 cents, or 0.69%, to $80.73 per barrel.

Despite the drop, both benchmarks rose about 3% for the week after falling 4% the previous week.

The drop pulled WTI out of the technical overbought zone for the first time in four days, while Brent futures stayed in overbought territory for the fourth consecutive day, a first since early April.

USOIL

The dollar reached its highest level in seven weeks against a basket of currencies, driven by the Federal Reserve’s patience in cutting interest rates, contrasting with more dovish stances from other institutions.

A stronger dollar can also reduce oil demand by making dollar-denominated commodities like crude more expensive for holders of other currencies.

US business activity reached its highest level in 26 months in June thanks to a rebound in employment, but price pressures eased significantly, raising hopes that the recent slowdown in inflation might persist.

In India, refineries processed nearly 1.3% more crude in May compared to a year earlier, according to provisional government data, while the share of Russian supplies in the country’s imports increased. India is the world’s third-largest oil consumer.

Signs of stronger demand in Asia also boosted sentiment. The region’s oil refineries are recovering some of their idle capacity after maintenance activities.

In China, the world’s second-largest oil consumer, Beijing warned that escalating frictions with the European Union over electric vehicle imports could trigger a trade war.

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Ignacio Teson
Ignacio Teson
Economist and Financial Analyst
Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.
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