Oil Prices Decline as United States Dollar Strengthened
Crude oil prices decline on Monday as the United States dollar strengthened, thus discouraged investors from more expensive, dollar-based oil trading.
The U.S. dollar, seen as a safe haven, rose as worries about Chinese property developer Evergrande’s solvency spooked equity markets and investors braced for the Federal Reserve to take another step towards tapering this week.
Also, the Organisation of Petroleum Exporting Countries and allies (OPEC+) has maintained gradual increase output as a plan while U.S. production in the Gulf of Mexico, which had been shut down as a result of the hurricane, is gradually returning to the market.
Today, the international benchmark Brent crude was trading at $74.66 per barrel, a 0.90% decrease from $75.34 a barrel sold on Friday. American benchmark West Texas Intermediate (WTI) was at $70.95 per barrel at the same time for a 1.21% fall after it ended the previous session at $71.82 a barrel.
Oil prices started the week on a bearish sentiment from the rising value of the US dollar, which had seen three-week record highs to make dollar-indexed crude more expensive for buyers.
The US dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, rose 0.15% to 93.33.
Prices also fell with an increase in the number of oil drilling rigs in the US, signalling an increase in production.
According to the weekly data released by oilfield services company Baker Hughes, the number of oil rigs; an indicator of short-term production in the country, increased by 10 to 411 for the week ending Sept. 17 from 401 the previous week.
However, since Hurricane Ida hit the southern region of the US and brought all oil production activities to a halt, production in the area is still not operating at full capacity, limiting further price declines.
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According to the US Bureau of Safety and Environmental Enforcement, 23.19% of the current oil production and 34.43% of natural gas production in the Gulf of Mexico have been shut-in.
A stronger dollar makes U.S. dollar-priced oil more expensive for holders of other currencies and generally reflects higher risk aversion, which tends to weigh on oil prices.
Brent has gained 43% this year, supported by supply cuts by the Organization of the Petroleum Exporting Countries and allies, and some recovery in demand after last year’s pandemic-induced collapse.
Oil Prices Decline as United States Dollar Strengthened
