Oil Prices Add surged by 2% in American trade on Wednesday, marking the first profit in four days. This rise comes after a sharp decline in US crude stocks, and was further bolstered by a tumbling dollar against major rivals, making dollar-denominated commodities cheaper for holders of other currencies.
Prices
US Crude
US crude increased by 2.4% to $82.78 a barrel, with a session-low at $80.48. On Tuesday, US crude had lost 1.5%, marking its third consecutive decline and reaching four-week lows at $80.24.
Brent
Brent crude rose by 1.75% to $85.08 a barrel, with a session-low at $83.45. On the previous day, Brent fell by 1.2%, hitting lows not seen since June 17 at $83.33 amid concerns about weakening Chinese demand.
US Stocks
Official data from the Energy Information Administration (EIA) showed that US crude stocks fell by 4.9 million barrels in the week ending July 12, far surpassing estimates of a 0.9 million barrel decline. This brought total stocks down to 440.29 million barrels, the lowest level since early February, signaling a positive demand outlook.
The Dollar
The dollar index fell by over 0.5% on Wednesday, reaching four-month lows at 103.65 against a basket of major currencies. The decline is attributed to widespread expectations that the Federal Reserve will raise interest rates in both September and November, influencing the dollar’s value.
Conclusion
The recent surge in oil prices highlights the market’s response to changing supply dynamics and currency fluctuations. A significant drop in US crude stocks and a weaker dollar have combined to lift oil prices, marking a positive shift after several days of declines.
FAQs
Why did oil prices rise by 2%? Oil prices rose by 2% due to a sharp decline in US crude stocks and a weakening dollar, which made oil cheaper for holders of other currencies.
How did US crude stocks impact oil prices? The Energy Information Administration reported a significant drop in US crude stocks, indicating strong demand and contributing to the rise in oil prices.
What role did the dollar play in the increase of oil prices? A weaker dollar made dollar-denominated commodities like oil cheaper for international buyers, thus supporting higher oil prices.
Why did Brent crude hit four-week lows earlier? Brent crude hit four-week lows earlier due to concerns about weakening demand from China, which is a major consumer of oil.
What are the future expectations for Federal Reserve interest rates? There is a widespread expectation that the Federal Reserve will raise interest rates in both September and November, influencing the dollar’s value and indirectly impacting oil price.