USA Dollar

Oil Steady as Stronger Dollar Offsets Signs of Tighter Supply

(Bloomberg) — Oil steadied near $81 a barrel as a stronger dollar curbed investor appetite for commodities, offsetting signs of a tighter global crude market.

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Refined products supplies are looking more constrained after Ukrainian drone attacks hit major facilities, pushing Russia’s refining rate to a multi-month low. Adding to the crunch, Indian refiners are refusing to take Russian crude carried on PJSC Sovcomflot tankers due to US sanctions, complicating a trade that helped contain prices.

Yet hampering crude’s recent rally is the US dollar’s strength, which makes the commodity more expensive for overseas buyers. A dollar index is heading for its best week since January following a surprise rate cut from the Swiss National Bank, as well as weakness in China’s yuan, even after the Federal Reserve signaled lower rates remain on the cards this year.

Global oil demand seems to be surpassing expectations, creating a bullish mood at the annual CERAWeek by S&P Global conference in Houston. Crude has advanced in the first quarter amid declining US inventories, production cuts by the OPEC+ alliance and the Ukrainian attacks on Russian refineries.

However, gains have been limited by surging supply from outside OPEC+ and a muddled economic outlook in top importer China.

In the Middle East, Israel said it would invade Rafah no matter what the US says, potentially escalating regional tensions, as it battles Iran-backed Hamas in the Gaza Strip. The Houthis in Yemen — who have been targeting ships in the Red Sea for months to support Hamas — have assured China and Russia that their vessels wouldn’t be at risk.

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