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Market Analysis

Oil Prices Dip Amid Strong Dollar and China Concerns
Amos Simanungkalit · 7.7K Views
1

Oil prices declined on Friday due to a robust dollar, mixed economic indicators, and concerns over China's economy impacting investor sentiment.

Brent crude prices dropped by 41 cents, or 0.5%, to $84.70 a barrel as of 0650 GMT. U.S. West Texas Intermediate (WTI) crude futures fell by 49 cents, or 0.6%, to $82.33 a barrel.

For the week, Brent crude was down 0.3%, while WTI showed a marginal increase.

The U.S. dollar index strengthened for the second consecutive session after better-than-expected data on the U.S. labor market and manufacturing earlier in the week. A stronger dollar typically reduces demand for dollar-denominated oil from buyers using other currencies.

Additionally, the absence of substantial stimulus measures from China, the world's top oil importer, has pressured commodities. ANZ analysts highlighted this in a note, pointing out that China's economy grew at a slower-than-expected rate of 4.7% in the second quarter, raising concerns about the country's oil demand.

"Concerns over supply in the short term kept the losses minimal," ANZ noted, referencing the worsening wildfires that threaten production in the Canadian oil sands.

On a positive note, Japan's core inflation increased in June, leaving the possibility of an interest rate hike in one of the major oil markets.

Earlier in the week, oil prices received some support after the U.S. government reported a larger-than-expected decline in weekly oil stockpiles. However, analysts from consultancy firm FGE observed that broader inventory trends appeared more bearish than anticipated this month. They noted that U.S. crude stocks have been drawing down at a slower-than-usual pace for this time of year, and global fuel stocks increased last week.

Meanwhile, the OPEC+ producer group is unlikely to recommend changes to its output policy, including the plan to start unwinding one layer of oil output cuts from October, according to three sources cited by Reuters on Thursday.

 

 

 

Paraphrasing text from "Investing" all rights reserved by the original author.

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