Strong Dollar Weighs on Brent Prices

on May 17 2013 8:03 AM
Crude Oil
Reuters

A strong dollar and demand worries kept Brent under pressure on Friday morning after news that the US Federal Reserve may end its monetary stimulus lifted the greenback. Brent is poised to end the week with little change and traded at $104.15 at 9:41 GMT on Friday morning.

CNBC reported that three Federal Reserve officials were calling for an end to the US central bank's monetary stimulus program. The news strengthened the dollar and made oil more expensive to holders of other currencies. Moving forward, most will be watching for major changes in the dollar, as the greenback is expected to drive oil prices in the short term.

Many believe the dollar has strengthened too much and will weaken over the next few days as most of the economic indicators coming out of the US have been disappointing. Data on Thursday indicated that the US economy could be slowing in the second quarter, and a jump in new jobless benefit claims added to concern.

Geopolitical tension in the Middle East added some support to Brent prices as the standoff between Iran and the West continued to threaten a supply interruption. Iran denied the United Nations inspectors access to Tehran's nuclear facilities, compounding worries that the nation could be closer to developing an atomic bomb.

The ongoing civil war in Syria has also been a source of concern for the region as the fighting escalated and began to drag some of its neighbors into the conflict. Now, a meeting to try to resolve the conflict diplomatically is being organized for early June but there is some contention over which nations will attend. Russian Foreign Minister Sergei Lavrov has said that Iran should be present at the meeting, something he claims Western leaders are trying to avoid.

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