Oil prices fall in early trade as dollar strengthens

19 May 2023 , 08:13 AM

Early Friday morning Asian trading saw a minor decline in oil prices as hopes that a U.S. debt default will be avoided were weighed against persistent inflation statistics that might signal future interest rate increases from central banks around the world.

Brent futures were down 2 cents at $75.84 per barrel. West Texas Intermediate (WTI) crude for the United States decreased 10 cents, or 0.043%, to close at $71.76.

US President Joe Biden and Speaker of the House Kevin McCarthy repeated earlier this week their desire to quickly reach an agreement to raise the $31.4 trillion federal debt ceiling and agreed to speak as soon as this Sunday.

The U.S. dollar rose against a basket of currencies on Wednesday to its highest level since March 17 amid hopes for an agreement and information indicating lower-than-expected initial unemployment claims.

An increase in the price of oil for holders of foreign currencies might be a drag on demand for oil.

Markets are also being affected by continuously high inflation figures and pessimistic remarks from central banks throughout the world.

According to government data released on Friday, Japan’s core consumer prices increased 3.4% in April versus a year earlier.

The gain in the core consumer price index, which includes energy costs but excludes volatile fresh food prices, was in line with median market expectations and came after a 3.1% increase in March.

According to two Fed members, the pace of U.S. inflation does not appear to be declining quickly enough to allow the Federal Reserve to stop raising interest rates.

While the majority of the tightening has already been completed, European Central Bank (ECB) Vice President Luis de Guindos stated that the ECB will need to keep raising interest rates in order to return inflation to its mid-term aim of 2%.

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