Oil Prices Tumble as Strong Dollar and Demand Concerns Weigh
The global oil market is facing significant headwinds, with prices plummeting as a result of a surging US dollar and growing concerns about demand growth. Dollar Strength Hits Commodities
The US currency has rallied to its highest level in two years, making raw materials priced in dollars more expensive for most buyers. This has led to a decline in crude oil prices, with Brent falling towards $72 a barrel and West Texas Intermediate hovering around $68. Other commodities, such as copper, have also suffered losses.
China’s Slowing Economy Raises Red Flags
China’s weakening profile in the global oil market remains a major concern. The US Energy Information Administration has reported that India is now the leading source of demand growth in Asia, as Chinese consumption falters due to its economic slowdown and increasing adoption of electric vehicles. This trend is expected to continue, with the International Energy Agency set to release further analysis later this week.
Global Market Faces Risk of Glut
The oil market has been volatile in recent weeks, with traders weighing the impact of OPEC+ supply moves, US monetary policy, and the risks to oil-demand growth. Many experts predict that the global market will flip to a glut next year, with Morgan Stanley recently trimming its price forecasts due to the softening outlook.
Expert Insights
“Even as Fed rate-cut bets rise, US economic resilience keeps the dollar strong, weighing on oil,” said Charu Chanana, chief investment strategist at Saxo Capital Markets Pte in Singapore. “Demand concerns remain after OPEC revised its growth forecast lower, and as traders digest what the upcoming Trump presidency could mean for China’s outlook.”
Middle East Tensions and US Inventory Levels
Meanwhile, tensions in the Middle East are also affecting the oil market. Israel is rushing to prepare a cease-fire deal on Lebanon, while the American Petroleum Institute reported a decline in US crude inventories last week. Inventory levels at the Cushing, Oklahoma, hub shrunk by a larger 1.9 million barrels, according to a document seen by Bloomberg.
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