Oil prices were up to a two-week high on Thursday, driven by weakness in the US dollar, while the country’s record high crude exports signaled strong global demand despite the latest economic headwinds.
Brent crude futures added 0.5% to $94.26 per barrel in London, while the US Texas Intermediate (WTI) crude futures jumped more than 0.5% to $88.39 per barrel. The two benchmarks posted between 2% and 4% gains in the previous session and hit two-week highs.
Supporting prices in oil were the dollar falling to a one-month low on expectations that the downturn in the economy would push the Federal Reserve to slow down with raising interest rates.
The greenback’s surge, which reached its highest in 20 years due to higher interest rates, has significantly pressured crude markets by increasing the price of dollar-denominated oil imports.
Markets also welcomed the weekly government data that showed US crude exports soared to a record-high of 5.1 million bpd, indicating some strength in global demand amid surging inflation and interest rates.
Prices to Remain Pressured by Headwinds
Oil prices returned in the green this month after the Organization of Petroleum Exporting Countries (OPEC) and allies’ move to cut output by 2 million barrels per day (bpd) from November, its largest supply reduction since the pandemic in 2020.
Supply is also expected to remain tight towards the end of 2022 due to output cuts plus sanctions on Russian oil.
However, US President Joe Biden’s plans to let out more oil from the Strategic Petroleum Reserve (SPR) may offset the tightening. Last week, the White House released around 3.4 million barrels of crude, resulting in SPR’s lowest inventory level since 1984.
Fuel demand in China is also expected to stay weak in the following months, considering the world’s top crude importer continued to stick to its strict COVID restrictions.
