Crude oil prices fall due to strong dollar and concerns about China

A strong dollar and concerns about the Chinese economy overshadowed the market, and crude oil prices plummeted on Friday and remained negative for the second straight week. According to Reuters data, Brent crude oil was 83 cents (1%) lower at 84.28 dollars, and US WTI (West Texas Intermediate) (CM: CL) crude oil futures were 63 cents (0.8%) lower at 82.19 dollars.

Since labor market and manufacturing data have exceeded expectations, the US dollar has recently risen, making crude oil expensive for holders of other currencies. This exchange effect causes demand for dollar-denominated oil to decline. As ANZ analysts point out, “the appreciation of the US currency will dampen demand for dollar-denominated oil from buyers holding other currencies.”

The growth rate of the Chinese economy in the second quarter fell short of expectations at 4.7%, and there are growing concerns about a decline in oil demand. Senior Chinese government officials have acknowledged the “complicated contradiction” of economic goals, and there is a sense of uncertainty about future economic stimulus measures.

Various industries, such as financial markets and airlines, were disrupted due to global technological failures. In Singapore, two large tankers collided and a fire broke out, further upsetting the oil market.

Despite these setbacks, US oil reserves have declined more than expected, and OPEC+ production suppression policies are underpinning crude oil prices. According to BNP Paribas analyst Aldo Spanger, “the third quarter balance will tighten due to OPEC's continued suppression and increased seasonal demand.”

Meanwhile, TipRanks' technical analysis tool flashes crude oil buying signals on a daily basis. This means that there is a possibility that crude oil price movements will continue to show strength over the next few sessions.