Analysts disagree about where the market is going and the impact of high prices: File Image/Pixabay
On the premise that soaring coal and natural gas prices in China, India, and Europe will exacerbate inflation and slow the global economic recovery, oil prices on Wednesday dipped.
West Texas Intermediate fell 71 cents, or 0.9 percent, to $79.93 per barrel at 0247 GM, while Brent fell 70 cents, or 0.8 percent, to $82.72 per barrel.
The U.S. dollar trading near a one-year high was also said to have contributed to the declines, as did a Reuters poll (never a reliable source upon which to make trading decisions) estimating that U.S. crude inventories rose by 100,000 barrels in the week to October 8 along with a 100,000 barrel climb in gasoline stockpiles.
Fawad Razaqzada, financial market analyst, ThinkMarkets
The trend is still clearly bullish and requires a macro driver to turn the tide
While one half of the analytical community worried about ruined demand recovery, the other half leaned towards the notion that soaring gas and coal prices would simply result in more demand for oil: "There are growing expectations that the high prices for gas and thermal coal are likely to boost demand for alternative fuels such as diesel and fuel oil," ANZ Research stated in a note.
Indeed, Russian president Vladimir Putin on Wednesday told media that it "is quite possible" for WTI to reach $100 soon; however, he added that "Russia and our partners and OPEC+ group, I would say we are doing everything possible to make sure the oil market stabilizes: we are trying not to allow any shock peaks in prices, we certainly do not want to have that - it is not in our interests."
Even though crude futures have exhibited signs of fatigue over the past week, Fawad Razaqzada, financial market analyst at ThinkMarkets, said, "The trend is still clearly bullish and requires a macro driver to turn the tide."
Plus, as noted by Bloomberg on Wednesday, investors betting on currencies such as Canada's dollar, Norway's krone, and Russia's ruble benefit because "their sensitivity to the price of crude increases when oil trades between $80 and $100 per barrel."
The news service went on to note that "the ruble appreciates by 2.3 percent when Brent moves from $80 to $100 per barrel, compared with a 1.6 percent gain when oil rose from $69 to $82; the sensitivity of the krone and Canadian dollar also increased, and the currencies appreciated by 2 percent and 1.3 percent, respectively, when oil moved in the higher range."