The prices of oil seem to have nosedived deeper within the week with experts attributing the plunge to the rising U.S. dollar.
It is expected that more supply is likely to come back to the market as global energy demand has improved significantly.
Reports reveal that U.S. West Texas Intermediate (WTI) crude futures were down by 0.6%, to trade at $63.17 a barrel, thereby giving up all of Thursday’s gains.
Brent crude futures dropped about 0.3%, to trade at $66.70 a barrel. The April contract expires on Friday.
Chief Global Market Strategist at Axi, Stephen Innes, in a recent statement gave an indepth analysis on why crude oil prices are currently having a downturn.
“Stronger US dollar, especially against Asia EM and higher bond yields, lead to the selling of long-duration assets. And given the massive overweight of ‘long duration, infinite growth tech’ at the index level, stocks are capitulating.
“And the domino effect is starting to hit commodities like oil triggered by a correction in the reflation trade due to higher US yields that are becoming a significant source of market volatility.
“Next week’s OPEC+ meeting has more potential to be damaging than a positive catalyst given the optimism now priced into oil and the likelihood the group takes steps that could prompt a round of profit-taking.”
Observers are however expectant that the situation may last for a short time owing to the evidence of an ongoing demand rebound and the likelihood that oil markets remain tight this year.