The oil market is bracing for its first weekly decline in four weeks, driven by the Federal Reserve's signals of potential interest rate hikes within the year. The anticipation of higher borrowing costs has curbed the appeal for riskier assets like oil, despite physical scarcity in the crude market.
West Texas Intermediate (WTI), a benchmark grade of crude oil, remained nearly static at around $90 per barrel this Friday. This represents a roughly 1% decrease over the week.
Technical analysis suggests that recent upticks in crude oil prices may have been excessive, contributing to the dampened sentiment towards oil investments. This comes despite the ongoing physical scarcity in the crude market that has been supportive of prices until now.
The Federal Reserve's indication that elevated borrowing costs could persist for an extended period has strengthened the dollar. A stronger dollar typically reduces the attractiveness of commodities priced in the currency, including oil. This dynamic is contributing to the lessened appeal of oil as an investment in light of potential interest rate hikes.
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