Oil drops amid the U.S. dollar strength

Oil prices dropped for a second continuous session on Friday. The U.S. Dollar rose on the prospect of interest rate hikes in the United States. However, they were on course to end the week. Limited changed and only slightly off multi-year highs.

Brent crude futures were under 52 cents, or 0.7%, at $72.56 a barrel as of 1100 GMT, reaching a 1.8% drop on Thursday. The contract is estimated to be broadly steady for the week.

U.S. West Texas Intermediate (WTI) crude futures were under 39 cents, or 0.6%, at $70.65 a barrel, after shrinking 1.5% on Thursday and is also set to be even on the week.

On Wednesday, Brent ended at its highest price after April 2019, while WTI settled at its highest after October 2018.

The market analysts viewpoints

Oil markets reversed piercingly overnight as a more robust U.S. dollar and falling commodity prices elsewhere witnessed the overbought technical correction continue, stated Jeffrey Halley, senior market analyst at OANDA.

The dollar has risen in the two sessions following the U.S. Federal Reserve projected possible rate hikes in 2023, earlier than market watchers previously anticipated. A soaring dollar makes oil more expensive in other currencies, controlling demand.

The prospect of rate hikes also registered on the longer-term growth outlook, which would ultimately harm oil demand, in contrast to the near-term outlook for an increase in demand as coronavirus related curbs on movement and business activity ease and road and air travel pick up, told Westpac senior economist Justin Smirk.

The coming term’s all very positive. The issue is how much further it can rise and how much range is there if you’re looking at an environment where interest rates will grow, Smirk said.

Oil prices also declined following Britain on Thursday reported its most significant daily increase in new coronavirus cases after Feb. 19, with government figures revealing 11,007 new infections versus 9,055 a day earlier.

Attaching negative sentiment were comments from Iran’s top negotiator on Thursday. They announced talks within Tehran and Washington on reviving the 2015 Iran nuclear deal have come more imminent than ever to an agreement.