11.01.202114:08 Forex Analysis & Reviews: Oil prices sank amid strengthening dollar

Crude oil prices sank on Monday amid the sharp and significant strengthening of the US dollar. The commodity sector is traditionally experiencing difficulties against the background of positive developments in the foreign exchange market. In particular, the US dollar exchange rate grew during three trading days last week, and this rise continued at the beginning of the current one, which provoked a negative reaction in the black gold market.

Nevertheless, the decline in oil prices, according to most analysts, will not be a long-term trend. There are too many reasons for joy, which, on the contrary, will contribute to a rapid increase in positions. This, in particular, is the anticipation for the start of the adoption of new financial incentives under the administration of US President-elect Joe Biden. Experts express full confidence that such measures will only expand, as Biden is determined to bring the country's economy out of the deep crisis caused by the coronavirus pandemic.

Moreover, the epidemiological situation of COVID-19 in the world does not cause much concern, even despite the next outbreaks of the disease recorded in the United States, Europe, and Asia. Oil market participants are probably betting heavily on a large-scale vaccination campaign that started at the end of last year in many states and is now only gaining momentum.

Thus, the black gold market does not pay attention to the current situation but directs its view to the future, which it sees in a more rosy light than it was before. Thanks to the vaccine, the situation should change dramatically in the coming months, so the medium - and long-term prospects for oil are quite positive.

According to last week's data, the price of oil rose by an average of 8%. And this growth, according to analysts, will continue this week, as a wave of optimism comes from the voluntary reduction of raw material production in Saudi Arabia. Recall that the country's authorities, without any external intervention and pressure, decided to reduce the total volume of oil produced for the period of February to March.

It is hoped that some other OPEC countries may follow suit and also reduce their production levels. However, the fact that Saudi Arabia did this has already had a positive impact on the market.

The price of futures contracts for Brent crude oil for delivery in March on the trading floor in London sank quite significantly by 1.14% or $0.64, which sent it to $55.35 per barrel. On the last trading day last week, the cost of raw materials significantly increased by 3% or $1.61 and sent the final price at $55.99 per barrel.

The price of futures contracts for WTI light crude oil for February delivery on the electronic trading platform in New York also fell by 0.77% or $0.4, to $51.84 per barrel. Friday's trading ended in the green zone with an increase of 2.8% or $1.41 and closed at the price level of $52.24 per barrel.