Oil declines in early trade due to profit-taking and a strong US dollar

3 Oct 2023 , 10:17 AM

After hitting a three-week low the day before due to a strengthening dollar and speculators taking some profits off the table following the last quarter’s large gains, oil prices declined in early Asian trade on Tuesday.

Brent futures for December delivery were down 34 cents, or 0.4%, at $90.37 per barrel.

West Texas Intermediate (WTI) crude for the United States fell by 29 cents or 0.3% to $88.53 a barrel.

Analysts claimed that as oil prices increased by about 30% to 10-month highs in the third quarter, some traders took profits.

According to the U.S. Commodity Futures Trading Commission, before the decline in the price of crude that began on September 28 U.S. speculators increased their net long futures and options holdings on the New York Mercantile and Intercontinental Exchanges to the highest level since May 2022.

After the U.S. government avoided a partial shutdown and economic data fueled hopes the Federal Reserve will hold rates higher for longer, which might limit economic growth, the U.S. dollar increased to a 10-month high against a basket of global rivals on Monday.

The Reserve Bank of Australia’s most recent policy announcement and guidelines are also being anticipated by investors in Asia on Tuesday.

According to a Reuters poll, Australia’s central bank is anticipated to hold its key interest rate stable at 4.10% on Tuesday, but one more increase is anticipated, with a top of 4.35% anticipated by the end of this year as long as inflation remains above goal.

The demand for oil may decline as a result of rising interest rates and a stronger dollar, which makes oil more expensive for owners of other currencies.

According to manufacturing figures, the euro zone, Germany, and the United Kingdom all continued to experience a slowdown in September. On the plus side, a government poll of Chinese manufacturers revealed that business was growing for the first time in six months.

Turkey’s energy minister announced that the country will resume operations this week on a pipeline from Iraq that has been stopped for around six months, adding more oil supply to the system.

On Wednesday, the Organisation of the Petroleum Exporting Countries (OPEC) will meet with Russia and other allies, although it is unlikely that it will change its existing stance regarding oil output.

According to a Reuters survey, OPEC’s oil production increased in September despite Saudi Arabia’s restrictions.

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