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Oil gets lower as the dollar rises and stocks fall, but it is up for the seventh week in a row

MOVERS OF THE FUTURE

Oil futures closed the week down, erasing early gains after a much hotter-than-expected May inflation report sent the dollar higher and dropped equities, despite the fact that the US benchmark registered its sixth weekly rise.

Price movement

On the New York Mercantile Exchange, West Texas Intermediate crude for July delivery slipped 84 cents, or 0.7 percent, to end at $120.67 a barrel, giving it a weekly gain of 1.5 percent.

On ICE Futures Europe, August Brent crude declined $1.06, or 0.9 percent, to end at $122.01 a barrel, giving it a 1.9 percent weekly gain and its fourth straight winning week. Both WTI and Brent finished the week at three-month highs.

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After closing Thursday at a record, July gasoline fell 2.4 percent to $4.1722 a gallon on Nymex, lowering it to a 1.9 percent weekly decline. Heating oil fell 0.8 percent to $4.3667 per gallon in July, after rising 2% for the week.

Natural-gas futures for July fell 1.3 percent to $8.85 per million British thermal units, after increasing 3.8 percent in the previous week.

Market forces

Crude oil prices fell from near three-month highs as the ICE US Dollar Index, which measures the currency against a basket of six major rivals, increased by 1%. The move came after a year-over-year increase in the consumer price index of 8.6% in May, a 40-year high, sparked anticipation that the Federal Reserve would be even more active than expected in raising interest rates to bring surging prices under control.

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A higher dollar can be bad for commodities priced in the currency, as it makes them more expensive for people who use other currencies. Stocks, on the other hand, plunged significantly, with the Dow Jones Industrial Average falling more than 800 points at its session low and the S&P 500 falling 2.7 percent. Sharp stock market declines can push down other assets, especially if investors are obliged to sell winning holdings to meet margin requirements.

Crude weakness, on the other hand, was relatively muted, according to Edward Moya, senior market analyst for the Americas at Oanda.

“As the economy continues to deteriorate, some traders are de-risking, but no one wants to forsake the best trade of the year, which is oil and energy stocks,” he said.

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Baker Hughes, an oilfield services business, stated on Friday that the number of oil rigs in the United States increased by 6 this week to 580, up from 461 at the same time last year.

This week, oil prices rose as gasoline demand remained strong. Despite the average U.S. pump price likely to surpass $5 a gallon for the first time, data from the Energy Information Administration earlier this week indicated a significant drop in gasoline stockpiles, signifying a further increase in demand as the summer driving season gets into full force.

In a report, Warren Patterson, head of commodities strategy at ING, noted that gasoline stockpiles, at just over 218 million barrels, “are closer to levels we generally see at the conclusion of the season, not at the beginning.”

Investors are keeping an eye on events in China, where portions of Beijing and Shanghai have been placed under lockdown again after recently reducing COVID-19 restrictions, according to press sources.

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According to Stephen Innes, managing partner at SPI Asset Management, the oil complex has accepted China’s “stop and start economics,” but crude may face headwinds from a strong US currency amid persistent stagflation concerns.

While continued releases from strategic reserves and increased OPEC+ production quotas have done little to cool oil prices, bulls believe that as the November elections approach, US policymakers will become increasingly desperate, potentially allowing Venezuela to export to Europe, “which could be a price capper.” “But the clearest read-through for oil markets, regardless of what stock markets are doing, is that tight oil and product markets should still support oil as we approach deeper into the U.S. summer driving season,” he added.

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