Will a Strong Dollar Keep Crude Under Pressure?
Crude Oil prices edged lower on Monday in thin trade ahead of the Christmas holiday on concerns about a supply surplus next year and a strengthened dollar.
Brent crude futures settled down or 0.43%, at $72.63 a barrel. U.S. West Texas Intermediate crude futures fell 0.32%, to $69.24 a barrel. MCX Crude drop 0.64% to 5900.00.
Concerns about European supply eased on reports the Druzhba pipeline, which sends Russian and Kazakh oil to Hungary, Slovakia, the Czech Republic and Germany, has restarted after halting on Thursday due to technical problems at a Russian pumping station.
The U.S. dollar was hovering around two-year highs on Monday morning, after hitting that milestone on Friday =USD.
“With the U.S. dollar changing from weaker to stronger, oil prices have given up earlier gains,” UBS analyst Giovanni Staunovo said.
A stronger dollar makes oil more expensive for holders of other currencies.
On Friday, U.S. data that showed cooling inflation helped alleviate concerns after the Federal Reserve interest rate cut last week.
“With the Fed sending mixed signals and some of these economic data points not being all that robust, the market is listless,” said John Kilduff, partner at Again Capital in New York.
Brent futures fell by around 2.1% last week, while WTI futures lost 2.6%, on concerns about global economic growth and oil demand after the U.S. central bank signalled caution over further easing of monetary policy.
Research from Asia’s top refiner Sinopec pointing to China’s oil consumption peaking in 2027 also weighed on prices.
U.S. President-elect Donald Trump on Friday urged the European Union to increase U.S. oil and gas imports or face tariffs on the bloc’s exports.
Trump also threatened to reassert U.S. control over the Panama Canal on Sunday, accusing Panama of charging excessive rates to use the Central American passage and drawing a sharp rebuke from Panamanian President Jose Raul Mulino.
Crude Oil Market Outlook
Technical Outlook – Crude Oil Futures
Crude oil prices retreated from the high of 5976 and closed at 5900 yesterday, compared to Friday’s close of 5944.
The technical chart indicates that crude oil is trading within a short-term pennant pattern, suggesting a significant move could occur in the near future.
For further upward momentum, prices need to break above the immediate resistance at 5988. Such a breakout could lead to a test of the 6050–6120 levels.
- Support Levels:
On the downside, any short-term dips towards 5880–5840 are expected to attract buying interest. However, if prices close below the lower trend line support at 5790, bearish momentum may take over.
- Bearish Scenario:
A break below 5790 would signal a shift in momentum, potentially pushing prices lower to the 5720–5680 range.
Until then, Happy Trading!
Commodity Samachar Securities
We Decode the Language of the Markets
Also Read: Forex Focus: EUR/USD Sinks Amid ECB & Fed Shifts , Natural Gas Soars 14%—What’s Driving the Surge?
Recommended Read: 2024 G20 Summit: Did It Deliver on Market Expectations?
Want Help On Your Trades ?
Chat with RM