Oil Price Fundamental Daily Forecast – Traders Concerned Hawkish Fed May Curtail Demand Growth
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Friday, putting them in a position to post a lower close for the week. Although the main fundamentals remain bullish, traders may be using this week’s hawkish tone in the Federal Reserve monetary policy statement as an excuse to book profits after posting a 17-day rally.
At 13:14 GMT, September WTI crude oil futures are trading $69.98, down $0.35 or -0.50% and September Brent crude oil futures are at $71.91, down $0.38 or -0.53%.
Fed’s Influence on Prices
Oil prices are also being pressured by a stronger U.S. Dollar, which rose as a consequence of the Fed’s actions. A rising dollar tends to be bearish for crude oil prices because it reduces foreign demand for the commodity.
The Fed on Wednesday signaled it would be considering whether to taper its asset purchase program meeting by meeting and brought forward projections for the first post-pandemic interest rate hikes into 2023. The dollar jumped to a two-month high after the Fed comments, en route to its best week in nearly nine months.
The prospect of rate hikes also weighed on the longer-term growth outlook for the economy, which would eventually hurt oil demand.
UK Reports Biggest Daily Rise in COVID Cases Since February 19
In news that could’ve encouraged some oil bulls to book profits, the U.K. reported its biggest daily rise in new cases of COVID-19 since February 19, with government figures showing 11,007 new infections versus 9,055 a day earlier.
Earlier in the week, the spread of the more infectious ‘Delta’ variant of the disease, first identified in India, prompted Prime Minister Boris Johnson on Monday to postpone a planned easing of social distancing rules that had been due for June 21.
Smooth US-Iran Negotiations Weigh on Sentiment
Indirect talks between Tehran and Washington on reviving the 2015 Iran nuclear deal have come closer than ever to an agreement, but essential issues remain to be negotiated, the top Iranian negotiator said on Thursday.
Traders are worried that a deal between the U.S. and Iran will lead to the lifting of sanctions against the rogue nation, and the release of about 1.0 to 1.5 million barrels per day of oil into the global supply. This could put pressure on prices.
Daily Outlook
The longer-term fundamentals remain bullish with the OPEC+ production cuts and the prospect of increasing demand providing the support. Meanwhile, a short-term correction shouldn’t harm the main trend and may actually drive prices into a value area, which would attract new buyers.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
More From FXEMPIRE:
