Just this morning, two of America’s largest crude oil company experienced another decline in the market. West Texas Intermediate (WTI) crude futures were down by 1.09%, trading at $61.01 per barrel while Brent Crude futures dropped 0.40%.
According to traders, the decline of the oil price is due to the recent recovery of US dollar. Trading of oil is conducted in dollars, therefore a rise in the dollar will affect the price of oil; making it more expensive for countries that use other currencies. Which can potentially hit the demand for oil and drag down the price.
“The firming dollar continues to thwart investor sentiment despite the bullish inventory data,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA.
Late on Wednesday, after a three-year lows set last week, the US dollar extends its recovery for a second day as it rises and peaks against a basket of six major currencies for more than a week.
The increased production of oil in the United States is also one of the factors that can drag down the oil price. The US produces more than 10 million barrels per day and is now the second largest oil stream in the world, following Russia and ahead of Saudi Arabia – the world’s top exporter of oil.
According to Singapore-based Phillip Futures, the surging US production of oil will affect the prices. Despite the falling price of oil, the US is anticipated to continue its mass production. If this continues, by late 2018 the US may take ahead of Russia as the world’s leading supplier of oil. “The market should worry more about surging American crude output, which will have a stronger influence on prices in the longer term,” said Will Yun, a commodities analyst at Hyundai Futures Corp.
Oil prices are also pressured by the rising tension in the Middle East, specifically along the borders of Syria and Israel. Although these two countries are not major players in the oil business, these conflicts in the Middle East are threats to the oil price.
For over the past weeks, these factors have caused the prices of oil to move up and down. Currently, oil prices have moved a bit far since the beginning of February. WTI started February at $65.80 and Brent started at $69.65.