Oil prices are poised for a weekly fall on Friday due to the surge in the US dollar ahead of the elections, following lower expectations for another Fed rate cut in December and weaker US economic growth data for the third quarter.
The International benchmark Brent crude traded at $74.31 per barrel at 3.22 p.m. local time (1222 GMT) on Friday, down by around 1.6% relative to the closing price of $75.55 a barrel last week.
West Texas Intermediate (WTI), the American benchmark, traded at $70.77 a barrel at the same time on Friday, a decrease of about 1.1% from last Friday's session, which closed at $71.56 per barrel.
The surge in the US dollar ahead of the run-up to the elections has aided the decline in oil prices.
Uncertainty surrounding the elections and the Fed’s actions have strengthened demand for the US dollar. Analysts suggest that the bank might avoid aggressive future rate cuts due to improving economic data, leaving investors in a 'wait-and-see' mode until after the elections.
Moreover, the core personal consumption expenditures price index, which the Fed considers an inflation indicator and excludes food and energy items, increased by 0.3% on a monthly basis in September, aligning with market expectations, and rose slightly above estimates by 2.7% on an annual basis.
Due to this data, expectations for another rate cut by the bank in December have decreased to 68%, down from the previous estimate of 74%.
Lower-than-expected rate cut is expected to strengthen the dollar against other currencies reducing demand by making oil more expensive for foreign currency users. The US dollar index increased by 0.07% to 104.04 on Friday compared to the previous session's close.
Meanwhile, data indicating lower-than-expected economic growth in the US supported further price declines, although some experts believe this data suggests the country’s economy is maintaining a stable growth rate ahead of the upcoming presidential elections.
According to the Commerce Department's first advance reading released on Wednesday, the US economy expanded 2.8% in the third quarter of 2024. The figure came under market estimates of a 3% growth.
The American economy expanded by 3% in the second quarter of 2024.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr