Oil slipped as a gaining dollar helped to cool the market after the biggest monthly advance since early 2022.
(Bloomberg) — Oil slipped as a gaining dollar helped to cool the market after the biggest monthly advance since early 2022.
West Texas Intermediate dipped toward $81 a barrel, hampered by a rising greenback which weighs on commodities priced in the currency. Crude surged last month with gains underpinned by signals that demand is running ahead of supply after OPEC+ reduced output. In addition, with US inflation cooling, there’s renewed speculation that the world’s biggest economy can avoid a recession.
There are reasons to be cautious about a further rally in the short-term. The biggest oil exchange-traded fund posted a record daily outflow recently, as investors take profit from crude’s stellar run. Oil’s climb has also left it close to being technically overbought.
The turnaround has been accompanied by a raft of banks including Goldman Sachs Group Inc. suggesting the market now faces a deficit after prices fell in the first half due to a supply glut. BP Plc joined the chorus when it reported annual results Tuesday, with Chief Executive Officer Bernard Looney saying demand for oil has been incredibly resilient of late.
“The rally seems to be taking a breather as prices have neared recent highs this year and the dollar has started strengthening again,” said Jens Pedersen, a senior analyst at Danske Bank.
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