One of the most highly watched commodities being oil, has been under increased scrutiny after the stagnant demand and highly requested increase in demand.
Oil increased yesterday, where it previously dropped below US$100 a barrel for the first time since April, in anticipation of the US CPI data coming up on Wednesday night and how that will affect the market.
Yesterday, Brent crude futures were up 24 cents, or 0.2%, at $99.73 a barrel at 0325 GMT. U.S. West Texas Intermediate crude gained 10 cents, or 0.1%, to $95.94. Severe interest rate hikes to curb inflation will introduce a proper recession that will of course hurt oil demand.
A further concern is that U.S. interest rate rises in response to high inflation will push up the US dollar when compared to Aussie dollars.
Head of commodities Warren Patterson stated:
"Lingering recession fears continue to hit the market, whilst the strength of the USD and flare-up in Covid cases in parts of China is certainly not helping,"
COVID travel restrictions in Asia also hurt the market. Multiple cities in the world's second-biggest economy have adopted fresh restrictions, from business shutdowns to broader lockdowns, and the possibility of new infections from a highly infectious subvariant of the virus.
The dollar index (DXY), which tracks the currency against a basket of six counterparts, also climbed earlier in the day to 108.56, which is its highest level in almost 20 years.
Generally, the oil price is traded with U.S. dollars, therefore, this stronger US currency makes it more expensive to holders of other currencies, putting downward pressure on demand and its dollar price.
U.S. crude stocks rose by about 4.8 million barrels for the week ended July 8. Gasoline inventories rose by 3 million barrels, while distillate stocks rose by about 3.3 million barrels, according to market sources citing American Petroleum Institute figures on Tuesday.
U.S President Joe Biden is also currently visiting the Middle East, in order to request Saudi Arabia and other OPEC producers to raise oil output to help stabilise prices.
Given all these figures, it is almost impossible to anticipate where the oil price will go, however, it will be keenly watched in the market going forward.