Oil Prices Suffer as Dollar Strength Adds to Demand Misery

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  • Commodities News
Oil Prices Suffer as Dollar Strength Adds to Demand Misery
Credit: © Reuters.

By Yasin Ebrahim

Investing.com – Crude oil prices continued to rack up losses Wednesday, as a surge in the dollar on expectations for tightening from the Federal Reserve added further pressure on sentiment amid ongoing jitters about the energy demand outlook.

On the New York Mercantile Exchange crude futures fell by $1.77 to settle at $63.69 a barrel, while on London's Intercontinental Exchange (NYSE: ICE ), Brent slipped $1.78 to trade at $66.45 a barrel.

Oil prices were hit by a surge in the dollar to more than nine-month highs just a day after the Federal Reserve signaled it could begin tapering its monthly bond purchases this year.

The U.S. dollar index , which measures the greenback against a trade-weighted basket of six major currencies, jumped by 0.47% to 93.58.

A stronger dollar makes oil, priced in the U.S. dollars, more expensive in other currencies. That weighs on demand, which is already under pressure as rising Covid-19 infections threaten the global recovery.

Weaker-than-expected data from China earlier this week showed signs of a wobble as the largest oil consuming nation has been forced to impose pandemic restrictions to get control of surging infections brought on by the Delta variant of the coronavirus.

Still, a further selloff could draw some reprieve for oil prices, with analysts forecasting a fall to the near $60 a barrel region, as a potential zone of support.

"Crude oil prices are getting oversold on a short-term basis. The trend is still weak here, but watch for a potential bounce / oversold rally onroute to a lower-$60s handle ahead," Janney Montgomery Scott said in a note.

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