Oil Falls After USD Rebounds and Supply Glut Reports

Oil prices tumbled on Thursday as a rebounding dollar and Kuwait’s stance that OPEC had no choice but to keep producing in an oversupplied market undercut the previous day’s rally.

Benchmark Brent oil settled down nearly 3 percent while U.S. crude lost almost 2 percent, weighed by the dollar’s rise against most currencies.

In the previous session, Brent rose nearly 5 percent and U.S. crude about 3 percent as the dollar suffered its biggest one-day tumble in 18 months on disappointment over the lack of a clear timeline for a U.S. interest rate hike. [USD/]

“It’s dollar play all over again today,” said Phil Flynn, analyst at the Price Futures Group in Chicago. “The fact that the oil market is oversupplied is a given, so the only real variable now are currency moves and how they impact commodities demand.”

A stronger dollar weakens demand from holders of other currencies for commodities denominated in the greenback. The reverse is the case when the dollar declines.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza