Oil Price Fundamental Daily Forecast – Dollar-Denominated Crude Pressured by Stronger Greenback

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday as the U.S. Dollar soared on hawkish comments from a widely followed Federal Reserve member. Prices were already trading lower as supply disruption worries eased while rising numbers of COVID-19 cases in China added to worries over demand in the world’s largest crude importer.

At 14:23 GMT, January WTI crude oil is trading $83.65, down $1.35 or -1.59% and January Brent crude oil is at $91.81, down $1.05 or -1.13%. On Wednesday, the United States Oil Fund ETF (USO) settled at $72.03, down $1.22 or -1.67%.

Demand Pressured by Stronger US Dollar

Treasury yields rose Thursday following comments from Federal Reserve speakers hinting at further interest rate hikes to come.

Yields rose sharply following comments from key Fed speakers on inflation and the pace of further interest rate hikes from the central bank. St. Louis Federal Reserve President James Bullard said Thursday that interest rate hikes from the central bank have had “only limited effects” on observed inflation.

The jump in Treasury yields drove up the U.S. Dollar, limiting foreign demand for dollar-denominated crude oil.

Tensions Ease in Europe

Worries about a supply disruption subsided after Poland and NATO said a missile that crashed inside NATO member Poland was probably a stray fired by Ukraine’s air defenses and not a Russian strike, easing fears of the war between Russia and Ukraine spilling across the border.

COVID Restrictions Weigh on Chinese Consumption

Worries over weak demand in China also weighed on prices after the country reported rising daily COVID-19 infections.

The major bearish event was Chinese refiners asking Saudi Arabia to reduce crude volume in December. This is a sign of struggling Chinese consumption. Furthermore, the country is also slowing its Russian crude purchases.

Glimmer of Hope for Bullish Traders

Oil gained some support on Wednesday after U.S. government officials said U.S. crude stocks fell by a bigger than expected 5 million barrels in the most recent week.

Other potentially bullish factors include the OPEC+ output cuts and the European Union’s planned embargo of Russian crude oil.