On Tuesday, April 25, crude futures closed lower as concerns about a slowing economy, a strong dollar, and the impact of interest rate hikes by central banks weighed on the market. WTI crude futures were down $1.69, or 2.2%, at $77.07 a barrel, while BRENT crude futures were down $1.96, or 2.4%, at $80.77 a barrel.
The decline in oil prices was driven by a stronger dollar, which made crude contracts more expensive for investors holding other currencies. The dollar index, which measures the dollar against six major currencies, was up 0.51% to 101.8678 overnight. Additionally, concerns about rising interest rates by central banks, including the Federal Reserve (Fed), the Bank of England (BoE), and the European Central Bank (ECB), weighed on the market, as investors predicted rate hikes at their upcoming May meetings. The anticipation of higher interest rates has raised concerns about the impact on economic activity and oil demand.
The Conference Board also released a report showing a drop in US consumer sentiment index from 104.0 in March to 101.3 in April, indicating a decline in consumer confidence. Furthermore, news of large withdrawals of deposits from First Republic Bank (FRB) raised concerns about a potential crisis in the banking sector, adding to the negative sentiment in the oil market.
Investors are closely monitoring the US Energy Information Administration’s (EIA) release of crude stocks data, with analysts expecting a decline of 1.5 million barrels in US crude inventories. The inventory data will provide further insights into the supply and demand dynamics of the oil market.
With a combination of factors such as a stronger dollar, anticipated interest rate hikes, declining consumer sentiment, and concerns about the banking sector, the oil market is facing downward pressure, resulting in lower oil prices. Market participants will continue to monitor these developments and their potential impact on the energy markets in the coming days.
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Wednesday, April 26, 2023