Brent futures slip as US dollar strengthens on aggressive Fed rate hike
Front-month ICE Brent has shed $1.18/bbl in the past day, trading at $90.86/bbl at 09.00 GMT.
PHOTO: Consecutive Fed interest rate hikes have propelled the US dollar index past the 111-level and sent bearish signals to the crude market. Getty Images
Upward pressure:
In a bleak outlook for the future of the energy crisis, Saudi Aramco chief executive Amin Nasser has expressed concerns over crude production capacity. He says any buffer in crude capacity would be eroded by demand growth.
Global supply concerns have mounted as tensions between the West and Russia intensify. Russian President Vladimir Putin has warned that he will “use all means” to defend Russian territory, adding that Kremlin’s nuclear threat is “not a bluff.” US President Joe Biden retaliated at the UN General Assembly, saying: "The US is ready to pursue critical arms control measures."
Also addressing the Iranian nuclear deal, Biden said the US would re-enter talks if Iran complied with its terms. In his statement, Biden said the US will not allow Iran to acquire a nuclear weapon.
Iranian President Ebrahim Raisi, meanwhile, said Tehran is serious about reviving a nuclear deal - formally known as the Joint Comprehensive Plan of Action (JCPOA) - but asked whether the US “can live up to their commitment this time”.
Downward pressure:
An aggressive US Federal Reserve rate hike has propelled the US dollar index past the 111-level and sent bearish signals to the crude market. The Fed increased its key interest rate by 75 basis points for a third consecutive time, bringing it to its highest point since 2008.
The US dollar has also strengthened relative to the Japanese Yen as Japan's central bank has maintained ultra-low interest rates. This has pulled the Yen down to a 24-year low against the greenback.
Last week, the British Pound hit a fresh 37-year low against the US dollar, which analysts expect could contribute to trigger a 75-basis-point interest rate hike by the Bank of England - the largest in 33 years. The UK's central bank is also on a mission to rein in runaway inflation.
By Konica Bhatt
Please get in touch with comments or additional info to news@engine.online
