Oil prices down over strong US dollar, investor profit-taking

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Oil prices down over strong US dollar, investor profit-taking
Oil prices down over strong US dollar, investor profit-taking

Africa-Press – Eritrea. Oil prices retreated on Tuesday from the highest levels seen in the past four months with investor profit-taking, strong US dollar, and market players’ cautious stance ahead of the US Federal Reserve’s (Fed) decision on interest rates.

International benchmark Brent crude traded at $86.85 per barrel at 10.30 a.m. local time (0730 GMT), a 0.04% decrease from the closing price of $86.89 per barrel in the previous trading session.

The American benchmark West Texas Intermediate (WTI) traded at $82.12 per barrel at the same time, a 0.05% fall from the previous session that closed at $82.16 per barrel.

Investor profit-taking in early trade, which followed record highs since November 2023 seen in the previous session as a result of supply constraints and geopolitical tensions, was the driving force behind the price slumps.

With support from the latest data, the US dollar index increased by 0.22% to 103.46 on Tuesday, aiding the fall in oil prices.

The strong US dollar is expected to lower demand by making oil more expensive for holders of other currencies.

Meanwhile, uncertainty over the US Fed’s upcoming monetary decision continues to weigh on prices.

Experts forecast that the bank will leave the policy rate unchanged and not start rate cuts in May as previously expected.

This will keep oil prices suppressed for now as high interest rates boost the value of the US dollar, a move that is set to deter oil trade by making oil more expensive for holders of other currencies.

However, rising hostilities in the Red Sea, one of the world’s busiest maritime routes for oil and fuel shipments, curtailed price declines. The regional war between US and UK forces fighting the Houthi organization is raising supply concerns in the region.

Yemen’s Houthi group has been targeting cargo ships in the Red Sea owned or operated by Israeli companies that are transporting goods to and from Israel in solidarity with the Gaza Strip, which has been under an Israeli onslaught since Oct. 7.

US Defense Secretary Lloyd Austin recently announced the creation of a multinational mission, Operation Prosperity Guardian, to counter the Houthi attacks.

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