Crude oil prices rose marginally on Friday, holding off pressure from a strong US dollar. Benchmark WTI was up 0.40% and traded at $81.07 per barrel, with Brent crude oil at $85.88, up by 0.40% at the time of writing. Nonetheless, the commodity could come under downward pressure as Gaza ceasefire talks gather momentum on Friday.
The US dollar has risen significantly against major world currencies this week, propelled by strong macroeconomic data and Fed interest rate decision. In addition, the US dollar has received a boost from Swiss National Bank’s surprise decision to cut interest rates by 25 basis points to 1.50%. This has strengthened the greenback’s safe-haven standing, and will exert more downward pressure on oil. A strong US dollar makes dollar-denominated crude oil more expensive, denting demand.
Despite the strong show by the US dollar, the underlying demand-side outlook for oil remains strong. The latest US crude oil inventory report showed a significant decline in US stockpiles. Also, the IEA revised upwards its demand forecast for 2024 by 110,000 barrels per day. Furthermore, increased attacks by Ukraine on Russian oil infrastructure have cut off more than 350,000 barrels per day from the supply line.
On the other hand, Israel and Hamas are reportedly closing in on a ceasefire deal, and this could shave part of the reported $2 per barrel premium on oil prices. The war has precipitated attacks on cargo ships by Houthi rebels over the past three months, and a ceasefire agreement will likely bring a stop to the attacks.
Crude oil prices need to stay above 80.70 to maintain the upside. With the buyers in control, WTI could build momentum to take on the resistance at 81.90, beyond which it could test 82.25. However, a move below 80.70 will shift the momentum to the sellers, with the first support at 80.40 in focus. A continuation of control by the sellers at this point will break the support and bring the psychological 80.00 within reach.
This post was last modified on Mar 22, 2024, 14:29 GMT 14:29