Crude futures climb on US dollar weakness

Front-month ICE Brent has gained $1.17/bbl on the day, to $93.62/bbl at 09.00 GMT.

PHOTO: US dollar has dropped to a five-week low with slower US business activity. Getty Images

Upward pressure:

The US dollar has eased to a five-week low after data showed US manufacturing and service sector activity has slowed for a fourth consecutive month. Contracting activity indicates that interest rate hikes from the US Federal Reserve (Fed) are hurting the world's largest economy, which could undermine its goal of reducing inflation by raising interest rates.

Traders and economists are now anticipating that the Fed might not increase the interest rate by the same magnitude as in previous rounds.

San Francisco Fed president Mary Daly has stated that the time has come to "talk about stepping down" the pace of the Fed's interest rate hikes, suggesting that future rate hikes may be less significant. The Chicago Fed president Charles Evans has added that "if the fund rate has to rise much more, the economy will really suffer."

Downward pressure:

International Energy Agency (IEA) head Fatih Birol has said that the organisation's member countries still have a "huge amount” of oil stocks to be released in case of supply disruptions. The IEA warned earlier this month that higher oil prices could trigger economic recessions and criticised OPEC+'s biggest production reduction since 2020 for "derailing oil supply growth."

Birol’s statement follows an announcement by the US to release 15 million bbls of crude from its strategic petroleum reserve to curtail oil prices, and readiness to release more stockpiles if needed.

Meanwhile, Saudi Arabia's Energy Minister Abdulaziz bin Salman has signalled a willingness to pump more oil if the global energy crisis worsens, despite cautioning that losing emergency stocks “may be painful in the months to come.” According to the Financial Times, he said, "We will be the supplier of those who want us to supply."

"Recent weeks have seen the prospect of a global economic slowdown and tightening monetary policy outweigh the threat of supply reductions," ANZ commodity strategist Daniel Hynes says.

By Konica Bhatt

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