Oil prices sank on Thursday as the Fed’s hawkish comments sent the dollar higher.
Crude oil is down more than 1% on Thursday afternoon, with WTI falling 1.32% at $71.20 per barrel, and Brent down 1.57% to $73.22. Both prices are still up on the week, but down nearly $2 from Wednesday highs.
Jerome Powell on Wednesday afternoon said that rising inflation is most transitory, but suggested there is also a risk that inflation may prove to be more persistent than the Feds expected. The Federal Reserve said that it may lift rates as early as in 2023—a year earlier than previously expected.
The ICE U.S. Dollar Index (DXY)—a measure of the dollar against a basket of six rivals–was up 0.9% at 3:43pm EDT.
That strong dollar played a big part in sending oil prices down. With commodities prices in the dollar now more pricey for those with other currencies.
WTI prices have soared over the last month, climbing from $61.94 on May 20 to $71.14 today for the July contract.
Strong oil demand and lower U.S. crude oil inventories, however, are capping today’s loss in price. The API this week projected that crude oil inventories had fallen by 8.537 million bareels, with the EIA estimating that the loss was 7.4 million barrels.
Analysts are projecting that the energy transition may trigger an oil price rise, with a lack of exploration investment tightens the supply side.
New York oil futures earlier this week hit their highest in 32 months on a more optimistic demand outlook and a lack of progress on the Iranian nuclear deal that will impact the number of barrels that Iran exports.
