Oil falls as dollar recovers, inflation persists

Oil dipped on Friday in Asia, relinquishing the previous session’s advances. The dollar’s strength fueled bets that the U.S. Federal Reserve will increase interest rates sooner than expected in response to soaring inflation.

Brent oil futures dropped 0.81% to $82.20 by 11:16 PM ET (4:16 AM GMT), while the U.S. West Texas Intermediate futures edged down 0.76% to $80.97.

Both benchmark contracts were on track to finish the week on a flat note. The week had been largely volatile for the black liquid due to the greenback’s recovery and speculations on whether the U.S. would release oil from the U.S. Strategic Petroleum Reserve to tame rising oil prices.

In an interview, Westpac senior economist Justin Smirk remarked that the market is “in a finely balanced situation.” Smirk further added that despite the tight supply in the market, the shift in fuel demand dynamic is a bigger concern.

The market is veering away from a strong economic recovery brought about by a revitalized demand for goods, which in turn boosted energy demand.

Despite the recovery in fuel demand due to an increase in air travel, tighter monetary and fiscal policy, combined with the northern hemisphere’s winter, could cloud that demand.