The global market of crude oil keeps on crashing as the U.S. Dollar is going up in value and the global oversupply of crude oil is still growing amid lower demand for it. At the same time, the U.S. crude oil inventories are getting more massive, which is an other bearish factor exerting downward pressure on oil prices.
The following factors made WTI oil drop down in value to $42 per barrel on Thursday, the Commodity Trading Department of Masterforex-V Academy reports.
At the same time, the very fact that the American currency is strengthening will have considerable effect on the market of energy carriers since they are traded for dollars. Despite the recent recovery of the common European currency against the U.S. Dollar, the American currency managed to win back some of the lost ground, thereby dropping EURUSD down to 1.112. The thing is that a stronger dollar makes oil futures less tempting for the buyers.
It is also important to pay attention to the fact that the USD rally is going on amid poor figures coming from China. While the Chinese economy is slowing down and the Chinese stock market has crashed, the People’s Bank of China devalued the Renminbi (the Chinese Yuan) by as much as 1,9% the other day, which is another bearish factor from commodity markets, including the global market of crude oil. The thing is that China is the world’s biggest importer of crude oil and other commodities. With that said, the very fact that the Chinese economy is slowing down, leads us to believe that it needs less oil, which leads to lower demand. At the same time, a weaker Yuan favors exporters while making imports more expensive. This is another factor to consider.
On Thursday, WTI oil futures dropped below $42/b after starting the trading day at $43.34/b.
Brent is also setting new lows. We all know that a couple of days ago, a barrel of Brent oil used to cost over $50/b. Now it costs under $49/b. On its way down, the price reached $48,89/b yesterday.
Investors Get Ready For New Lows
According to Masterforex-V Academy, oil prices are currently fluctuating around 6-year lows. At this point, it is clear the multiple attempts of oil prices to recover now seem to have been successful only within the scope of consolidation following the long-term downtrend. However, the downtrend seems to have resumed. So, the price is currently trying to find a new bottom while being pressed by multiple factors.
