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Oil Prices Fall to Lowest Point Since May on Stronger Dollar
- US currency climbs to highest level in over nine months after Fed signals it will pare back bond-buying program.
Oil prices have dropped to a 3-month low after a strengthening dollar and the resurgence of COVID-19 forced prices below $66 per barrel on Thursday.
The World Health Organisation earlier disclosed that the circulation of the Delta variant in areas of low vaccination is driving transmission of COVID-19. Also, coronavirus-related deaths have spiked in the United States over the past month.
Oil prices fell Thursday to their lowest level in about three months after the US dollar strengthened on concern that the global economic recovery might slow and the Federal Reserve’s signals that it will scale back stimulus measures.
Brent crude oil, the international benchmark in energy markets, dropped 3.1% to $66.01 a barrel. West Texas Intermediate futures, a key U.S. gauge, declined 3.6% to $62.74 a barrel. Both benchmarks are on course for their lowest daily close since May.
The dollar’s advance to its strongest level since early November added to recent worries in energy markets. Investors had already grown increasingly nervous in recent days that rising Covid-19 cases are threatening to hobble the global recovery and could sap demand for oil in major economies like China.
A stronger dollar tends to put pressure on commodities denominated in the US currency—such as oil and industrial metals like copper—which become more expensive for other currency holders.
The International Energy Agency last week trimmed its oil demand outlook due to the spread of the Delta variant. OPEC, however, left its demand forecasts unchanged.
An unexpected rise in US gasoline inventories in a weekly supply report added to demand concerns, given the demand for the motor fuel typically peaks during the northern hemisphere summer.
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