NEW YORK – Oil prices rose for a second day on Wednesday, recouping recent losses as the US dollar eased off recent gains and U.S. fuel inventory figures revealed larger-than-expected drawdowns and a rebound in consumer demand.
“I believe we have bottomed, but it will remain exceptionally volatile, keeping easy speculative money out of this market,” said Rebecca Babin, senior energy trader at CIBC Private Wealth US.
Consumer demand in the United States has recovered, according to inventory figures, though refining product supply has remained 3% lower over the last four weeks compared to the same period last year.
On Wednesday, the dollar reached a new two-decade high against a basket of currencies before retreating. A strong dollar reduces demand for oil by making it more expensive for foreign buyers. The dollar index was down 0.9% in the early afternoon U.S. hours.
“All of these are dollar-driven rallies,” said Eli Tesfaye, senior market strategist at RJO Futures. “All raw-material-dominated currencies are rising; crude is not moving in isolation here.”
On Tuesday, Goldman Sachs reduced its 2023 oil price forecast due to expectations of weaker demand and a stronger US dollar, but said global supply disappointments only reinforced its long-term bullish outlook. Global equities fell to two-year lows on Wednesday after the Bank of England said it would intervene in the bond market to stem a damaging rise in borrowing costs, assuaging investor fears of financial system contagion.
