Oil dipped as the dollar strengthened ahead of central-bank meetings this week that’s expected to lead to further monetary tightening.
West Texas Intermediate traded near US$85 a barrel after giving up an earlier gain of more than 1 per cent. The dollar is trading near a record, making commodities priced in the currency less attractive. A raft of central-bank decisions from the US to Europe and Asia are scheduled in a global assault on inflation.
“The biggest cause of swings in oil prices comes from adjustments to demand expectations,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “An easing of lockdowns in China would definitely come through more forcefully. There is a certain element of pent-up demand, which would explain the initial knee-jerk reaction.”
The gap between prompt Brent crude futures and the second month contract -- a measure of the market’s reading of near term supply and demand tightness -- remains in a bullish backwardation pattern. The spread was at US$1.38 a barrel, compared with US$1.07 a week ago.
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