Global oil prices soared on Tuesday, 1st September after having slumped the day before, i.e. Monday. Both Brent Crude and US West Texas Intermediate gained by almost one per cent on Tuesday morning. In terms of monetary valuation, Brent Crude rose by 47 cents to about $46 per barrel while the US West Texas Intermediate increased by 43 cents to around $43 per barrel.
Earlier, the biggest contributor to Monday’s oil woes was the disparity between supply and demand, since demand for oil has remained stagnated at levels seen before the pandemic struck at large.
Global oil prices and inventory continues to rollick
Also, another factor contributing to oil prices’ rise on the day was the crash in the value of the dollar in the wake of US Federal Reserve’s change of stance regarding its policy on inflation.
According to reports, the US dollar slumped by around 0.04% against the world's leading currencies to around $92. This is the first time since May 2018 that the US dollar has lost so much ground in the international market.
Australian trading company BetaShares’ Chief Investment Officer (CIO) Louis Crous said, on the subject, “It (the policy shift) really cements the fact that you’re looking at negative real rates for the U.S.
which will not be great for the U.S. dollar. That’s good for commodities”. Analysts also pointed out that a rise in the activities of the manufacturing sector in China also contributed to the rise in the oil prices.
August saw manufacturing resume at quite a brisk pace and demand for exports also increased leading to a corresponding boost to the global oil value. “Expectations of higher consumption, powered by a China recovery, lifted sentiment and saw both Brent crude and WTI track higher in Asia.
Both contracts are now close to monthly highs and are poised to shake off the range-trading malaise of the past two months, said market strategist Jeffrey Halley, who is employed with analytics firm OANDA. Despite the upward trajectory of the prices, market observers are more preoccupied about whether global oil inventories will be demanded in the same manner as they were, prior to the pandemic.
To this end, ANZ Research noted, “This has created plenty of uncertainty about whether demand for transportation fuels will ever return to normal”.