Oil may maintain its positive momentum because of the weak greenback, according to an analyst stated on Thursday. The founder of Vanda Insights, an energy consultancy Vandana Hari, stated that:
“As far as fundamentals are concerned, there is really not much to move oil around either way, which is why we have seen it pretty range-bound, but within that continuing to grind higher because of a weaker dollar,” “That’s been the only support, I would say.”
Like other commodities exchanged globally, oil is denominated in dollars, so a softer greenback grants the ability for oil prices to gain positive momentum.
Last March, a futures contract for U.S. crude prices descended more than 100% and became negative for the first time ever while the request for the famous commodity fainted due to the coronavirus pandemic.
There was a meager retrace in crude oil prices during May and June since economies resumed after restrictions in order to restrain the coronavirus. However, oil request has dropped in July and August in some countries while flatlining in others.
On Thursday, international benchmark Brent crude oil futures were exchanging near $44.50 a barrel while U.S. West Texas Intermediate futures were nearly $41.65 a barrel.
Hari described the dollar as likely to continue to be under stress through 2021. That is probably going to be in favor of the U.S. economy to maintain the greenback weakly. This is likely to produce some support to crude oil prices. Hari said
U.S. President Donald Trump’s attempts “to keep the U.S. stock markets buoyant” will further improve oil status. That would incorporate lots of financial and monetary stimulus and positive news on a coronavirus vaccine. Hari said
“These measures will keep risk-on trade, it will keep sentiment quite buoyant in larger global financial markets,” “To some extent, I think it will support sentiment in oil, it will prop up the oil.”
The above content is considered to be market commentary information and shall not be perceived as independent investment research or investment advice.
A Weak dollar may provide positive momentum for oil
Market Trends - 03/09/2020