The market derived some support from US production cuts caused by Hurricane Ian
Oil prices bounced slightly on Tuesday but came under renewed selling pressure today as risk aversion continues to dominate global financial markets while the US dollar extends its rally, refreshing two-decade highs due to persistent safe-haven demand. The USD index jumped to 114.70, targeting the 115.00 mark on the back of rising Treasury yields.
Against this backdrop, Brent crude remains on the defensive, holding slightly above January lows seen around $82.50 earlier in the week. Traders continue to sell the futures as recession worries keep rising amid aggressive tightening by major central banks.
Meanwhile, the American Petroleum Institute reported overnight that US crude oil inventories rose by about 4.2 million barrels last week, while gasoline inventories fell about 1 million barrels and distillate stocks rose by about 438,000 barrels. A bearish report added to a downbeat tone in the oil market ahead of the official Energy Information Administration data due later in the day.
On the other hand, the market derived support from US production cuts caused by Hurricane Ian, which entered the US Gulf of Mexico this week. For now, about 11% of the Gulf’s total oil production were shut-in. However, this bullish driver could be short-lived, with the overall tone in the market staying bearish anyway.
Brent crude has settled below the $84 figure on Wednesday, struggling after rejection from $85 a barrel. The path of least resistance remains to the downside at this stage, especially as the greenback stays resilient while risk-off tone persists across the financial markets. Following another ugly session on Wall Street, Asian equities tumbled on Wednesday, digesting hawkish comments from Fed officials Bullard and Kashkari.
