Oil prices fell by more than 3% yesterday. Brent dropped at its lowest point to $64 per barrel, its lowest level since the end of April.
At $57 per barrel, WTI likewise recorded a three-week low. Following the contract rollover, the front-month WTI futures contract jumped by a good $1 overnight. The main reason for yesterday's price slide was the sharp 1.5% appreciation of the US dollar, which put pressure on virtually all commodity prices. This was sparked by comments by a high-ranking ECB representative who indicated that the ECB's bond purchases could be temporarily increased. This initially put huge pressure on the euro, notes Commerzbank.
In addition, very robust US housing market data in the afternoon gave the US dollar a boost. In the evening, the API reported a surprisingly sizeable 5.2 million barrel reduction in US crude oil stocks. So far, the market's response has been limited. Just a few weeks ago, such news would have triggered a crude oil price rally.
Sentiment on the oil market has visibly turned, so it remains to be seen whether a confirmation of the inventory reduction by the official DOE data this afternoon will be able to push up prices. The fact remains that the oil market will continue to be oversupplied until OPEC significantly cuts its output, though there is little chance of this happening. The strategy of defending market shares upon which OPEC embarked at the end of November is likely to be confirmed at its meeting on 5 June.
