A strengthening U.S. dollar will drive oil prices lower. As a strong greenback makes oil more expensive for other currencies, demand for it has been affected as well. Hence, experts say the oil market is currently leaning towards a bearish outlook.
However, opening day trade in Asia saw oil prices slightly up today with Brent oil futures expiring in April rising 0.4 percent to $77.61 a barrel. Meanwhile, West Texas Intermediate (WTI) crude futures rose 0.3 percent to $72.53 a barrel by 21:03 ET (02:03 GMT). Both contracts slid more than 7 percent each last week.
Besides the U.S. dollar gaining strength, another factor that traders are closely watching is the ongoing crisis situation in the Middle East. While the developments in the region have currently not led to supply disruption, any escalation could lead to either prices stabilizing or increasing.
In case real supply disruptions happen, traders may be compelled to take on a more bullish approach and drive market sentiment in a different direction.
Oil prices near-term
In the short term, the crude oil market will most likely remain under bearish pressure due to the rising strength of the U.S. dollar. Last week’s sharp sell-off has turned both long-term and intermediate forecast on the downside. The 50-day moving average at $73.46 is resistance, followed by the 200-day moving average at $76.37.
According to experts, a sustained move over $72.48 will be an indication of counter-trend buyers in action. However, any upside will not materialize until the momentum can overcome the previously mentioned moving average.
Federal Reserve chairman Jerome Powell recently said an interest rate cut is not likely to happen until May. This means higher-for-longer interest rates will certainly have an impact on global oil demand in the coming months and influence oil prices.
For more markets news, click here.