Oil prices plunges to 12-month low


Crude oil prices fell heavily on Tuesday weighed down by the strong US dollar and fuel demand worries. U.S. West Texas Intermediate crude dropped below $74 per barrel, the lowest since December 2021 while Brent crude fell below $80 for the first time since January.

The oil traders and investors anticipated aggressive interest rate hikes from central banks to trigger a global economic slowdown and drag on demand. Recently the latest US factory orders and ISM services PMI data showed a strong U.S. economy which fueled worries that the Federal Reserve will continue more aggressive interest rate increases in coming meetings.

Meanwhile, the EIA released a short-term energy outlook report on Tuesday evening. The report showed the EIA again lowered its forecast for global demand growth next year. On the positive side, there are signs that China, the world's largest importer of oil is reopening its economy. On Wednesday, health authorities also announced several other new rules easing restrictions nationwide, but the country is still imposing restrictions like lockdowns in some cities and towns.

Moving ahead, oil investors should closely monitor the movement of the US dollar because the strength of the US dollar negatively affected crude oil prices. As of this writing, the crude oil futures slightly recovered from a steep sell-off supported by a large draw in API crude inventory. The investors should also watch closely Wednesday evening to see whether official data from the US Energy Information Administration (EIA) confirms the API numbers.

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