Oil prices on global markets are falling today, despite tight supplies due to production cuts in some countries. North Sea Brent was down more than half a percent to around $92.70 a barrel shortly after 3:00 p.m. CET, while U.S. West Texas Intermediate (WTI) crude oil was just above $89 and showed a similar decline.
Bad prospects
According to analysts, worse economic prospects have a greater influence on prices. With a stronger dollar, there are growing concerns that demand for oil and fuel in general will be reduced by major central banks looking to keep interest rates at higher levels for longer than expected.
“Due to the rise in US bond yields following the tightening stance of the US central bank (Fed) last week, fears of an economic recession could once again dominate the oil market,” said Tina Tengová, an analyst at CMC Markets in Auckland, according to Reuters. Oil prices remained largely unchanged on Monday after news that Russia had slightly eased a ban on gasoline and diesel exports.
In recent days, the central banks of major countries, in addition to the United States, also in Britain and the eurozone, have confirmed that they intend to continue fighting inflation uncompromisingly. They thus indicated that it is necessary to continue to count on a strict monetary policy, which, contrary to the original assumptions, will probably last longer. Higher interest rates are slowing economic growth, which is also reflected in weaker demand for oil.
The dollar is strengthening
Meanwhile, the US dollar strengthened against a basket of currencies to a ten-month high. Higher bond yields in the US also attract foreign investors, which increases their demand for dollars. Since oil is traded mainly in dollars, a stronger exchange rate of the US currency usually has a negative impact on demand, as oil is therefore more expensive for buyers abroad in terms of their currencies.
The markets are also watching the negotiations on the approval of further spending by the US government. If everything is not done by October 1, the government will have to start restricting the operation of some institutions. According to analysts, the effects would be more on the reputation of the United States, the real effects would be milder if the restrictions did not last long. Since 1981, a similar situation has occurred in the USA fourteen times.
source: ÄŒTK
