Crude oil dips on strong dollar and oversupply concerns

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Crude oil dips on strong dollar and oversupply concerns

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 Crude oil dips on strong dollar and oversupply concerns
Image source: © Batareykin | Megapixl.com

Highlights

  • Crude oil price tumbled on Tuesday.
  • Producer prices reached 11-year highs on Tuesday.
  • Governments across the globe are trying hard to put restrictions to curb the spread of the Omicron variant.

Crude oil prices tumbled to nearly US$73 per barrel on Tuesday following a piece of news released by the International Energy Agency (IEA) stating that the new variant of coronavirus is ready to affect the global demand recovery. In addition to this, producer prices reached 11-year highs as per the US data, boosting market expectations of faster stimulus tapering. The move supported the dollar, creating pressure on crude oil.

February delivery Brent Crude oil futures last traded at US$73.03 per barrel down 0.29%, whereas January delivery WTI crude oil futures traded 0.99% down at US$70.03 per barrel as of 15 December 2021 at 12:20 PM AEDT.

Rising US dollar and COVID-19 cases

The US dollar hovered to nearly one-week highs on Tuesday, prompted by the producer price data.

The prices of crude oil were also weighted after the World Health Organization stated that the Omicron variant of coronavirus is spreading at an extraordinary rate, prompting the market to inch lower.

Governments across the globe are trying hard to put restrictions to curb the spread of the Omicron variant.

IEA squeezed the crude oil demand forecast for 2021 and 2022 by 100,000bpd, primarily due to lower jet fuel utilisation amid ongoing travel restrictions.

Oil rig

Source: © Tebnad | Megapixl.com

On the flipside, OPEC increased its world oil demand forecast for the initial quarter of 2022, on Monday stating that the impact of the Omicron variant would be mild.

Bottom Line

Crude oil prices eased on Tuesday on rising concerns of Omicron variant of coronavirus and rising US dollar that makes oil more expensive for other currency holders.

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