Oil prices took a dive on Friday, heading for their second consecutive weekly loss, as a stronger dollar and economic jitters from China cast a shadow over the market. Brent crude fell by 83 cents, or 1%, to $84.28 per barrel, while U.S. West Texas Intermediate (WTI) (CM:CL) crude futures dropped 63 cents, or 0.8%, to $82.19, according to data from Reuters.
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Dollar’s Grip Tightens
The U.S. dollar’s recent climb, bolstered by stronger-than-expected labor market and manufacturing data, has made oil more expensive for holders of other currencies. This currency effect dampens demand for dollar-denominated oil. As ANZ analysts noted, “A stronger U.S. currency dampens demand for dollar-denominated oil from buyers holding other currencies.”
China’s Economic Slowdown
Adding to the pressure, China’s economy grew by a slower-than-expected 4.7% in the second quarter, sparking concerns about reduced oil demand. With Chinese officials admitting to “complex contradictions” in their economic goals, uncertainty looms over future stimulus measures.
Supply Disruptions and Geopolitical Tensions
Adding to the market’s woes, a global tech outage disrupted various industries, including financial markets and airlines. In Singapore, a collision between two large oil tankers resulted in fires, further unsettling the oil market.
Despite these setbacks, recent reports of a larger-than-expected decline in U.S. oil stockpiles and OPEC+’s restrained output policies have offered some support to oil prices. According to BNP Paribas analyst Aldo Spanjer, “Q3 balances are set to tighten due to continued OPEC restraint and seasonal demand increases.”
What Is the Outlook for Oil?
Meanwhile, the TipRanks Technical Analysis tool is flashing a Buy signal for oil on a daily time frame. This means the price action in oil could continue to display strength over the coming sessions.
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