WTI Crude sharply Drops To $97

WTI crude oil drops as the US dollar gains are entrenched. Bulls have mentioned that product inventories are at critically low levels, which suggests restocking will keep crude oil demand strong.

Oil price is down by 10.6% on the day after falling from a high of $111.42 to a low of $97.46. Crude has dropped on Tuesday due to the worries over the global recession in addition to curtailing demand overshadowed a strike by Norwegian oil and gas workers. The said strike could cut exports and exacerbate supply shortages. However, the Union leaders have announced that the strike is over.

Investors are concerned over central banks across the world that is taking aggressive actions to limit inflation. The Reserve Bank of Australia hiked by 50 basis points with more in the pipeline to come as per its hawkish statement.

We are seeing safe-haven demand for US Treasuries that have also boosted the US dollar by about 1.37% as traders taking it to a high of 106.792 on the day.

This has also weighed on dollar-denominated oil as it becomes more expensive for buyers holding other currencies. Product inventories are at critically low levels, which also suggests restocking will keep crude oil demand strong. Considering that little progress has been made towards solving structural supply challenges, even a slow rate of demand growth can endanger energy supply.

In this context, brent crude and distillates prices are also exhibiting strong asymmetry towards upside moves in demand, which could point to an uncoiling process should commodity demand rebound.