© Reuters.
Posted by Parani Krishnan
Investing.com – Resurgence, much to the chagrin of oil bulls.
Both WTI and Brent crude fell nearly 2% on Monday, their biggest drop in a month, as the greenback extended its rebound from last week’s lows on expectations that the Federal Reserve will approve in its interest rate decision on May 3.
Trading in New York settled down $1.69, or 2.1%, at $80.83 a barrel, after hitting a session low of $80.47. Its biggest drop before that was exactly a month ago on March 17, when it fell 2.4%. On a weekly basis, the US crude index rose without pause over the previous four weeks, rising from settling at a 15-month low of $66.74 during the week ended March 10 to end at $82.52 last week after the deepening of production cuts announced by OPEC. at the beginning of this month.
Despite its recent bullish streak, WTI needs to hold above the 50-week exponential moving average at $82.80 to avoid risking further declines, says charting analyst Sunil Kumar Dixit.
“A sustained break below this area will eventually extend the decline towards $79.50 and $78.50, followed by an acceleration towards $77.50,” said Dixit, Chief Technical Strategist at SKCharting.com.
The London trader’s price, the global benchmark for crude, was down $1.55, or 1.8%, at $84.76. Like WTI, Brent has rallied over the past four weeks, rallying from a 15-month low of $74.99 during the week ending March 10 to end at $86.31 last week.
Brent crude futures for June settled at $84.76/bbl, down $1.55, 1.8%.
“Expectations that the Federal Reserve is not done with raising interest rates has given the dollar a new bullish run and that is putting pressure on higher oil prices,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.
The Fed added 475 basis points to rates over the past 13 months, bringing them up to a peak of 5% from the 0.25% level they were at during the start of the coronavirus outbreak in March 2020.
In the next few days, investors will have one last chance to hear from Fed officials before they enter the traditional period of obfuscation ahead of the May 3 interest rate decision, including New York Fed President John, Michelle, Lisa and Christopher.
Waller, one of the Fed’s top policy hawks, upped the ante on interest rates when last week he made no secret of his desire for further monetary tightening.
Waller’s call helped trigger a crash in gold prices, which until Thursday appeared to be on track for a new record high. Higher interest rates tend to benefit the dollar and affect international demand for commodities denominated in the currency.
It wasn’t the only commodity hurt by Waller’s comments on Friday. The dollar’s recovery from a one-year low also leveled crude oil with only a modest advance rather than potentially larger gains, after the International Energy Agency raised its oil demand forecast in 2023.
Apart from the dollar, China, the largest importer from China, will release a series of economic data on Tuesday, including first-quarter reports, and }, as market participants hoped for more clarity on the uneven recovery in the world’s second-largest economy.
