On Tuesday crude oil prices saw a steep fall, as dollar broadly strengthened.
On the New York Mercantile Exchange, light, sweet crude futures for
delivery in July slipped $1.30, or 2.2%, to $58.41 a barrel on the Globex
electronic session.
On London's ICE Futures exchange July Brent crude fell $1.12, or 1.7%, to $64.38 a barrel.
Markets digested comments from Federal Reserve Chairwoman Janet Yellen and Fed Vice
Chairman Stanley Fischer, which were largely perceived as hawkish, giving a strong boost to the greenback.
Analysts also spoke of headwinds for oil prices. USD/JPY broke the level of 123 for the first time in nearly 8 years.
Morgan Stanley admitted that a renewed dollar appreciation weighed on oil last week, however, it was also pressured by other factors.
“Oil will need to overcome a growing list of near-term headwinds to continue its recovery," the body added.
Among other negative factors which Morgan Stanley outlined were:
- Mounting OPEC supply with Saudi and Iraqi production touching record levels;
- Underappreciated risk of Iranian supply;
- Neutral-to-bullish speculative positioning;
- Signs of stress in physical markets.
Oil traders are getting nervous ahead of the meeting of the Organization of the Petroleum Exporting Countries on June 5 in Vienna, as they await indications of a supply response from Saudi Arabia and other key oil producers.
OPEC’s tone will have a
fundamental impact on crude oil prices for the rest of the year, analysts think. While there are few cues from the market, swings in oil prices have been mainly due to changes in the U.S. dollar, which is likely to influence prices the whole week, especially amid concerns of the Greek default and the U.S. rate hike.
Economist Barnabas Gan at
Singapore’s OCBC Bank admitted that the upcoming OPEC meeting will be one of the most controversial given the likelihood for a cohesive call from high-cost OPEC producers for higher oil prices to recover fiscal costs.
“However, we continue to expect OPEC to remain steadfast to their call for maintaining the production quota at its current 30 million barrels a day,” Mr. Gan said adding that any surprise quota reduction will see a sharp knee-jerk reaction in oil prices.
