Prices of oil plummet as U.S. increasing stockpiles undermine OPEC’s output cut efforts

Prices of oil suffered a decline on Thursday. The international benchmark, Brent crude futures, settled at $64.92 per barrel, which was 0.8% or 50 cents lower than their previous settlement. The United States West Texas Intermediate traded at $61 per barrel – 0.9%, or 56 cents, lower compared to the previous session. 

The increase in U.S. crude stockpiles threatens the ongoing efforts led by the Organization of Petroleum Exporting Countries to limit output in order to balance the current oil glut.  Storage in U.S. tanks and terminals were perceived to have increased to 2.9 million barrels last week.

In addition, the recovering dollar also had a negative effect on oil prices. The greenback recently capped near one-week high against its major currency rivals, extending its recovery from the previous week. Oil trading is administered in dollar, making fuel imports for countries using different currencies expensive as the dollar rises.

U.S. dollar hovered near one-week high

As mentioned above, on Thursday, the dollar extended its recovery and settled near one-week high after the Fed’s January meeting indicated policymakers were in favor of raising interest hike in the near future. Taken into account the growth of the American economy and the relatively high inflation rate, investors and analysts are raising their bets towards an upcoming interest rate hike which is expected to be held four times this year.

According to the dollar index, the greenback settled at 90.117, which was 2.2% higher from the currency's previous settlement. The dollar reached a high of 90.166 in early trade recording its strongest point since February 13, 2018. Last week, the dollar hit a three-year low of 88.25.

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