Oil Market Rises As Dollar Weakens
On Thursday, the oil market rose after retail data in the United States prompted a sell-off in the Dollar, the trading currency for the commodity, with Brent crude futures up by $1.26 or 1.5 per cent to $82.86 a barrel and the US West Texas Intermediate crude futures up by $1.39 or 1.8 per cent to $78.03 per barrel.
The US Dollar index slid about 0.3 per cent after data showed US retail sales fell more than expected in January.
A weaker Dollar usually boosts oil prices as it makes the commodity cheaper for holders of other currencies.
Retail sales in the world’s largest economy, a signal for demand, tumbled 0.8 per cent last month, the biggest drop since March 2023, the Commerce Department’s Census Bureau said.
Data for December was revised lower to show sales rising 0.4 per cent instead of 0.6 per cent as previously reported. November sales were also revised down to show them unchanged, rather than rising 0.3 per cent.
The data prompted optimism around interest rate cuts from the US Federal Reserve going forward, which could be positive for oil demand.
The International Energy Agency (IEA) said that global oil demand is losing momentum, prompting the agency to trim its 2024 growth forecast to 1.22 million barrels per day from 1.24 million barrels per day.
On the supply side, the IEA estimated that supply will grow by 1.7 million barrels per day this year, up from its previous forecast of 1.5 million barrels per day.
Earlier this week, the agency which represents industrialized countries, predicted oil demand will peak by 2030, undercutting the rationale for investment.
Economic woes sent warning to investors as two major economies began recessions.
The United Kingdom fell into recession in the second half of 2023 when its gross domestic product (GDP) contracted by 0.3 per cent in the fourth quarter, having shrunk by 0.1 per cent in the third quarter, official data showed.
Japan also slipped into recession at the end of last year, surrendering its title as the world’s third-biggest economy to Germany.
Once the second-largest economy in the world, Japan reported two consecutive quarters of contraction on Thursday — falling 0.4 per cent on an annualized basis in the fourth quarter after a revised 3.3 per cent contraction in the third quarter.
