The oil price, which entered the green zone on market
charts on Monday, continues to stay that way, but with relatively modest
increases in price.
The momentum that we saw on Monday, especially in
the Asian markets, has clearly slowed down.
Analysts were bracing themselves for a big impact on
the markets in general and oil in particular in the wake of the remark made by
Jay Powell, the Chair of Fed Reserve, on April 4; he mentioned that the worlds’
biggest economy is reaching a ‘reflection point’ – a period of accelerated
growth followed by something akin to a stagnation.
Since oil is still in the green territory on
Tuesday, it’s worth looking at the strength of the US dollar to see whether it
was the latent factor that is behind the rise in oil price, despite that being
pretty modest.
The relationship between the strength of the US
dollar and the oil price has long been established; the stronger the dollar,
the lower the oil price becomes. At present, the dollar has weakened a bit and
in inverse proportion to that the oil price has climbed.
The demand concerns in Asia, meanwhile, are growing
in light of accelerated infection rates; In India the situation is very grim;
in the rest of Asia, there is no room for complacency either.
India, which managed to initiate a successful vaccine
rollout a few months ago, is struggling to maintain the momentum to keep it afloat
due to shortages of vaccines and many logistical challenges that stem from
rising infections across the vast country.
Since two of the biggest economic engines in the
world are in the region of Asia, the oil markets are closely watching the
situation, as the health of the former clearly determines the demand of the
commodity.
