Washington and Tehran talks raise concerns about an "oil flood"

Oil falls due to strong dollar and the possibility of an increase in "interest rates"

The market is still witnessing a convergence between supply and demand for oil.

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Oil prices fell for the second session in a row yesterday, and the US dollar rose thanks to the possibility of an increase in interest rates in the United States, but crude is on track to conclude the week with little change, and at just below its highest levels in several years.

Brent crude futures fell 47 cents, or 0.6%, to $72.61 a barrel, to continue a 1.8% decline recorded the day before yesterday, and the contract is heading towards its first weekly loss in four weeks.

Oil and the dollar

In turn, US West Texas Intermediate crude futures fell 39 cents, or 0.6%, to $70.65 a barrel, after falling 1.5% the day before yesterday.

West Texas crude is also heading towards recording its first weekly decline in four weeks.

And “Brent crude” recorded, last Wednesday, the highest settlement price since April 2019, at a time when “West Texas Crude” achieved its highest level since October 2018 upon settlement.

The dollar has rallied strongly in two sessions, since the Federal Reserve forecast possible interest rate increases in 2023, earlier than market watchers had previously expected.

A rise in the dollar usually increases the cost of oil in other currencies, reducing demand.

"The recent move in oil is short-lived and most likely linked to the strengthening of the US dollar that we have seen over the past two sessions," said Kelvin Wong, market analyst at CMC Markets in Singapore. In terms of demand and supply mechanisms.

Britain and Iran

Oil prices also fell after Britain announced, the day before yesterday, the largest daily increase in new infections with “Covid-19” since February 19, 2021, as government figures show about 11,000 new infections, compared to 9,055 injuries the previous day.

Negative sentiment was also reinforced by statements by Iran's chief negotiator yesterday, who said that talks between Tehran and Washington on reviving the 2015 Iran nuclear deal are closer than ever to reaching an agreement.

“Renewed negotiations raise concerns that this may lead to the lifting of US sanctions, resulting in a flood of oil hitting the market,” ANZ analysts said in a note to traders, noting that despite this, the fundamentals indicate The market is still witnessing a convergence between supply and demand.

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