Market Update: Oil Prices Downturn Due to Robust Dollar and Profit Bookings
- Posted on October 3, 2023
- News
- By Arijit Dutta
- 238 Views
In early Asian trading on Tuesday, oil prices experienced a dip following a recent three-week low. This decline was attributed to the bolstered US dollar and traders opting to cash in on their gains from the previous quarter. Brent futures for December delivery fell by 34 cents, accounting for a 0.4 percent drop, resting at $90.37 per barrel by 0002 GMT. Meanwhile, US West Texas Intermediate crude (WTI) saw a decline of 29 cents, or 0.3 percent, reaching $88.53 per barrel.
Source: https://economictimes.indiatimes.com/
In early Asian trading on Tuesday, oil prices experienced a dip following a recent three-week low. This decline was attributed to the bolstered US dollar and traders opting to cash in on their gains from the previous quarter. Brent futures for December delivery fell by 34 cents, accounting for a 0.4 percent drop, resting at $90.37 per barrel by 0002 GMT. Meanwhile, US West Texas Intermediate crude (WTI) saw a decline of 29 cents, or 0.3 percent, reaching $88.53 per barrel.
Analysts noted that some traders decided to seize their profits after witnessing crude prices surge nearly 30% to reach 10-month highs during the third quarter. Prior to the pullback in crude prices that commenced on September 28th, US speculators significantly increased their net long futures and options positions on both the New York Mercantile and Intercontinental Exchanges. This surge marked the highest since May 2022, according to reports from the US Commodity Futures Trading Commission.
On Monday, the US dollar achieved a 10-month high against a selection of major peers. This surge followed the US government's successful avoidance of a partial shutdown and optimistic economic data that heightened expectations of a prolonged period of higher rates by the Federal Reserve. These developments are anticipated to potentially slow down economic growth. Investors in Asia are closely observing the Reserve Bank of Australia's forthcoming policy decision and guidance, which is set to be unveiled on Tuesday.
Forecasts from a Reuters poll indicate that Australia's central bank is likely to maintain its key interest rate at a steady 4.10 percent on Tuesday. However, speculations suggest another hike could be on the horizon, potentially reaching 4.35 percent by the year's end, especially as inflation continues to surpass its target. The prospect of elevated interest rates, coupled with a robust dollar that renders oil more costly for holders of alternative currencies, may exert a dampening effect on oil demand.
In Europe, recent manufacturing data reveals that the eurozone, Germany, and Britain continue to grapple with a downturn as of September. On a brighter note, an official survey of Chinese manufacturing activities demonstrated expansion for the first time in six months. Adding to the supply of crude in the market, Turkey's energy minister announced the resumption of operations this week on a pipeline originating from Iraq, which had been inactive for roughly six months.
Looking ahead, OPEC+ - the collaboration between the Organization of the Petroleum Exporting Countries (OPEC), Russia, and other allies - is scheduled to convene on Wednesday. However, it is unlikely that there will be any alterations to the current oil output policy. A Reuters survey has indicated that OPEC oil output experienced a second consecutive increase in September, despite efforts by Saudi Arabia to implement cuts.
