Oil drowned in dollar rally

Arseniy Dadashev, AUFI 11 November 2021 13:41

Having reached local highs around $85.50 dollars per barrel, oil sharply collapsed in the second half of Wednesday's trading along with other risky assets. Brent has met support on the approach to the level of $82 and is trading steadily today, slightly retreating from the lows.

The sales on the black gold market followed in response to a powerful rally of the dollar, which in turn was provoked by unexpectedly strong data on American inflation, which exceeded even the wildest forecasts. Last month, consumer prices in the country jumped the most in 30 years, and this is a strong argument in favor of tightening the Fed's rhetoric and an earlier start of the rate hike cycle.

Meanwhile, industry statistics from the Ministry of Energy showed that crude oil reserves increased by 1 million barrels last week. Despite the fact that the forecast assumed a more tangible increase in the indicator, the release added negativity to the market, as it diverged from the API estimate, which reflected a reduction in inventories a day earlier.

In the near future, oil prices are expected to consolidate, and the dollar will remain the focus of attention. The US currency is stable after the rally in anticipation of signals from Fed officials with the filing of an inflation report. The threat of a barrel returning below the $80 mark is low, but the potential for further growth has definitely weakened in light of recent events.

Arseniy Dadashev, Director of the Academy of Financial Management and Investments

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