Crude oil feeded by the weakness of the dollar today. Thus, it is caused by verbal intervention by officials from the Trump administration. The barrel of Brent is trading at around $70.45. WTI on the New York Mercantile Exchange is located at $66.10. Moreover, on Wednesday, US Treasury Secretary Stephen Mnuchin announced that a weak dollar had a favorable effect on trade.
The decline in the US currency traditionally supports demand and commodity prices. Munchin’s comments, which sounded as part of the World Economic Forum, sent the dollar to the new three-year lows. This January is the worst in the history of the dollar. Paired with the pound, the dollar experienced the deepest fall since April last year.
OPEC Efforts Increased Market Sensitivity to Geopolitics
The unintended consequences of OPEC measures aimed at combating crude oil suprlus in the market may manifest a sharp increase in price volatility itself. The sensitivity increases as the surplus decreases. Because of the excess supply over the past few years, the oil markets have barely reacted to geopolitical tensions, including events in Iraqi Kurdistan and the war in Syria and Yemen.
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Now experts believe that the threat of disruptions in supplies will appear more often. Therefore, it can send oil to around $80. In the conditions of the excessive supply reduction at the world level, feverish speculative purchases and price jumps are very likely to accompany any reports on geopolitical conflicts.
Saudi Arabia Irritated by Increased Attention to the Shale Industry
On Wednesday, the Saudi Energy Minister criticized the International Energy Agency (IEA). He accused the department of exaggerating the influence of American shale oil on the world oil market. Thus, in response to comments by the head of the IEA Fatih Birol, Khalid al-Falih said at a forum in Davos that the agency is considering the scale of increasing production in the United States in isolation from the context.
Falih attended the forum with his Russian counterpart Alexander Novak and US Secretary of Energy Rick Perry. Their countries now produce more than one-third of the world’s total crude oil production. The presence of an American representative at a meeting of traditional manufacturers illustrates the transforming influence that the shale boom has had on world energy markets.
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