Oil rates experience decline influenced by strengthening US dollar


(MENAFN) On Tuesday, oil rates experienced a decline influenced by the appreciation of the US dollar against other currencies and uncertainties surrounding the timing of potential interest rate cuts by the US Federal Reserve (Fed). Despite these factors, ongoing Israeli military actions in Gaza City tempered the extent of price drops in the Middle East.

As of 11:52 a.m. local time (0852 GMT), the international benchmark brent crude traded at USD84.90 per barrel, marking a slight decrease of 0.29 percent from its previous closing price of USD85.15 per barrel. Similarly, the American benchmark West Texas Intermediate (WTI) traded at USD81.43 per barrel, down by 0.25 percent from its earlier close at USD81.63 per barrel.

The strengthening US dollar has contributed to subdued oil demand by increasing the cost of oil for users of foreign currencies. This scenario has further pressured prices downward amidst ongoing concerns over when the Fed might initiate interest rate cuts, which could affect economic growth and, consequently, oil demand.

Market sentiment remains influenced by expectations regarding the Fed's monetary policy decisions, with a 74 percent probability of a rate cut in September and a higher likelihood of cuts in subsequent months. Investors are closely watching upcoming US economic data releases, particularly growth and personal consumption figures, for insights into the Fed's future actions.

Persisting high interest rates could potentially dampen oil demand, leading to further price declines, while lower rates might weaken the US dollar relative to other currencies, offering some support to oil prices.

Meanwhile, geopolitical tensions in the Middle East continue to be a focal point for market participants, given the region's significant role in global oil supply. Escalating tensions raise concerns about potential disruptions to energy supply routes, which has limited the extent of price decreases in the face of broader market pressures.

The interplay of these factors underscores the complex dynamics shaping oil markets, where economic indicators, monetary policy expectations, and geopolitical developments collectively influence price movements and market sentiment.

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