Resurgence of COVID-19 cases in UK also exerts downward pressure on prices.
Oil prices continued downwards on Friday, fueled by the rising US dollar value, making dollar-priced oil more expensive and discouraging investors amid the resurgence of virus cases in the UK.
International benchmark Brent crude was trading at $72.52 per barrel at 06.59 GMT for a 0.76% decrease after closing Thursday at $73.08 a barrel.
American benchmark West Texas Intermediate (WTI) traded at $70.69 a barrel at the same time for a 0.49% drop after ending the previous session at $71.04 per barrel.
Oil prices have hit record levels over the euphoria of rising demand from signs of recovery in the world’s economies from COVID-19 and pandemic-related restrictions, which been gradually eased especially in large oil-consuming countries like China, the US, and most of Europe.
A decline in prices, however, came after the Fed signaled that it could make two rate hikes of 0.25% each in 2023 to tame rising inflation.
Amid fear of higher interest rates, investors flocked to the dollar and Treasury notes, which rose substantially late Wednesday.
Fueled by the rate projections, the US dollar index, which includes a basket of currencies like the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, closed Wednesday with a 0.82% rise. The index was up 0.07% at 0646 GMT on Friday.
Prices were also negatively affected after the recent rise in virus cases in the UK, driving fears that restrictions will be renewed and oil demand will be suppressed again.
Health authorities in the UK reported 11,007 new COVID-19 cases on Thursday, the most since Feb. 19.
The rising numbers are mostly blamed on the Delta variant of the virus, which was first detected in India.
However, the vaccination drive continues robustly. Over 42.21 million people have received the first dose of a COVID vaccine, which means that more than 80% of adults have now been jabbed. The number of fully vaccinated has also reached 30.6 million.
The UK government has delayed the date for easing all restrictions for about four weeks to July 19, with the hope of curbing the further spread of the virus by fully vaccinating the entire adult population.
Limiting further declines, Fitch Ratings has significantly revised up its 2021 and 2022 oil price predictions to reflect stronger year-to-date prices, a market deficit due to a recovery in demand, constrained supply from OPEC+ countries and heightened US capital discipline.
The rating agency increased its 2021 price forecast to $63 a barrel from $58 a barrel for Brent and raised WTI oil prices to $60 a barrel from $55 a barrel.
The agency forecast that Brent price would average $55 a barrel in 2022, up from $53 a barrel in its previous estimate, while the forecast price of WTI increased from $50 a barrel to $52 a barrel.
Fitch noted that the global market remains predominantly stable as a result of the ongoing economic recovery, as well as the valuable contributions made by the OPEC’s Declaration of Cooperation countries to achieving a more balanced oil market.
To support the positive sentiments, OPEC Secretary-General Mohammad Barkindo said during the 9th Technical Meeting the OPEC and non-OPEC countries that the global market remains predominantly stable as a result of the ongoing economic recovery.