oil dropped and dollar increased

Oil Dropped and Dollar Increased

As COVID-19 outbreaks in China, demand for crude oil is reduced, and increasing fears of global recession resulted in prices of oil dropped and dollar increased.   

The euro also lost its base on Tuesday and traded near parity with the US Dollar. On the other hand stock markets fell sharply in the light of increasing interest rates, and concerns over how the economies will behave worldwide.

Normally a stronger US currency weighs on oil because dollar-priced commodity gets more expensive for holders of other currencies.

Commerzbank said the combination of rising energy prices and high-interest rates is driving concerns about recession. The fears of a recession are seriously impacting the oil demand.

Commerzbank also said that new COVID-19 mobility curbs in China also impact the prices.

The highly infectious BA.5.2.1 sub-variant of the virus has forced various Chinese cities to adopt new COVID-19 curbs. They are trying to get safe from the virus through business shutdowns to broader lockdowns.

Jake Sullivan-White House National Security Advisor said Joe Biden is going to meet Gulf leaders in Saudi Arabia where he will discuss the case of higher oil production from OPEC.

Jeffrey Halley-OANDA’s senior market analyst for the Asia Pacific said in a note that there is very less hope to unlock oil production from Saudi Arabia or the UAE.

Most of the oil producers are already at maximum capacity.

Jenet Yellen-US Treasury Secretary is also in Asia to discuss more ways to strengthen the sanctions on Moscow, including a price cap on Russia to limit the profits and lower the energy prices.

Fatih Birol-Executive Director at International Energy Agency said price caps on Russian oil must include refined products. The west has imposed sanctions on Russia over the offensive war in Ukraine, which is a “special military operation” according to Putin, has caused oil dropped and dollar increased.