Oil prices drifted lower at the last trading session of the week. The plunge is attributed to the surging U.S. dollar and expectations revealing more supply is likely to come back to the market as global energy demand has improved significantly.
What you must know: At the time of writing this report, 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.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, 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.”
What to expect: Oil pundits, however, anticipate the bearish trend might likely be short-lived, given evidence of an ongoing demand rebound and the likelihood that oil markets remain tight this year.