Crude oil price held the week’s gains on Tuesday; marking its fourth session on rebound after plunging below the previously steady support zone of $90 in the past week. Even so, it remains below the critical level of $100 as has been the case since the beginning of September. As at the time of writing, Brent futures – the benchmark for global oil – was at $95.04; up by 0.9%. At the same time, WTI oil was at $88.92.
The easing of the US dollar is largely behind the recorded crude oil price gains. Even so, demand concerns continue to weigh on the commodity.
As is the case with other dollar-priced financial assets, crude oil price tends to move inversely to the value of the greenback. Indeed, the retreat of the dollar index has boosted oil prices since late last week. This comes amid heightened bets that the US inflation is nearing its peak.
Economists expect a CPI reading of 8.1% on a year-on-year basis compared to July’s 8.5%. This would make the second consecutive month that consumer prices have risen at a slower pace after hitting a 40-year high of 9.1% in June.
Stalled talks over the return of the Iran nuclear deal are yet another bullish factor in the crude oil market. This has lowered optimism over the probable relief of the tight supplies.
Reasoning behind the curbed gains
Even with the aforementioned bullish factors, demand concerns have continued to weigh on crude oil price. This is especially so as China strives to deal with the persistent coronavirus by curbing activity; an aspect that threatens to slow oil demand both at the domestic and global level. China is the leading importer of crude oil and second consumer of the commodity after the US. Besides, an environment of high interest rates led by the Fed may further weigh on crude oil price in the short term.