Oil News: Strong Dollar Caps Gains Despite U.S. Stockpile Draw

Oil Prices Stabilize Amid Mixed Signals

Light crude oil futures are trading nearly flat on Friday as traders attempt to maintain this week’s gains. The market has experienced a volatile week, with prices initially pressured by concerns over Chinese demand but later supported by a significant draw in U.S. stockpiles.

At 09:27 GMT, Light Crude Oil Futures are trading $81.16, down $0.14 or -0.17%.

Dollar Strength and Economic Concerns

A strengthening U.S. dollar is capping oil price gains, as a robust greenback typically dampens demand for dollar-denominated oil from foreign buyers. The dollar’s climb follows stronger-than-expected U.S. labor market and manufacturing data earlier in the week.

Adding to the bearish sentiment, China’s economy grew at a slower-than-anticipated 4.7% in the second quarter. This underwhelming performance has sparked concerns about oil demand from the world’s top importer.

Supply Factors Provide Support

Despite these headwinds, supply-side factors have helped limit losses. Worsening wildfires in Canada are threatening production in the oil sands region, potentially tightening global supply. Additionally, the U.S. Energy Information Administration reported a larger-than-expected 4.9 million barrel decline in crude stockpiles for the week ended July 12.

OPEC+ Outlook

OPEC+ is unlikely to recommend changes to its current output policy at its upcoming online ministerial monitoring committee meeting on August 1. The group plans to start unwinding one layer of oil output cuts from October, gradually phasing out 2.2 million barrels per day over the course of a year.

Japan’s Inflation and Interest Rates

In other economic news, Japan’s core inflation increased in June, potentially paving the way for an interest rate hike in this major oil market. This development could influence oil demand in the region.

Market Forecast

The short-term outlook for oil prices remains cautiously bullish. While economic concerns and dollar strength are exerting downward pressure, supply constraints and steady U.S. demand are providing support. Traders should closely monitor upcoming economic data, particularly from China, and any shifts in OPEC+ policy for potential market-moving catalysts.

Light crude oil futures are straddling a short-term pivot at $80.96 on Friday. Trader reaction to this level should set the tone into the close.

A sustained move over $80.96 will indicate the presence of buyers. This could drive prices toward the last minor top at $82.33. This level provided resistance on Thursday.

A failure to hold $80.96 will be a sign of increasing selling pressure. This could trigger a sharp break into Fibonacci support at $79.42. Taking out the minor swing bottom at $78.81 will reaffirm the short-term downtrend, putting the 50-day moving average at $77.96 on the radar.