London, iXbroker Newsroom —
Oil markets saw a choppy session on Thursday, as crude prices gave up early gains amid pronounced volatility in the US dollar, stemming from renewed speculation over the future of Federal Reserve Chair Jerome Powell. The unease was stoked by ongoing commentary from former President Donald Trump regarding US monetary policy, casting an uncertain shadow over both commodities and the broader financial markets.
From Early Gains to Flat Trading
Brent crude, the global oil benchmark, surged to an intraday high of 69perbarrelbutfailedtoholdontothatmomentum,retreatingtosettleat69 per barrel but failed to hold onto that momentum, retreating to settle at 69perbarrelbutfailedtoholdontothatmomentum,retreatingtosettleat68.38 in late London trading. West Texas Intermediate (WTI) mirrored this roller-coaster action, first climbing, then relinquishing its gains. This pattern coincided with dramatic swings in the US dollar, a crucial factor for commodities priced in greenbacks.
The whipsaw in the dollar’s value was closely tied to ongoing market debate about the Federal Reserve’s direction, especially following Trump’s hints to lawmakers about possibly replacing Powell as Fed Chair—a notion he later denied but did little to quell market jitters. Trump’s persistent calls for lower US interest rates added further confusion to an already tense market.
“When you see this kind of move in oil, it’s mostly about the dollar,” commented Giovanni Staunovo, a commodity strategist at UBS Group AG. “It seems market participants are adjusting their expectations around Federal Reserve policy and Chair Powell’s future just a bit.”
Dollar Determines the Pace
The strength or weakness of the US dollar has always been a fundamental driver for commodity markets, particularly oil, which is universally priced in dollars. As the dollar weakened sharply early in the session, oil and other commodities saw bids from overseas buyers utilizing stronger local currencies. However, as uncertainty about the future of Powell and Fed policy set in, the dollar rebounded, prompting traders to lock in oil profits and retreat from risk exposure.
Other US dollar-denominated assets, including metals and grains, likewise traded lower during the session.
Geopolitical and Supply Pressures Offer Support
Despite the pressure from currency markets, several oil-specific fundamentals remain bullish. US crude inventories at the vital Cushing, Oklahoma, storage hub continued to draw down, underscoring ongoing concerns over future supply. Distillate stockpiles in the US—critical for industrial and heating use—are currently at their lowest seasonal level since 1996, even after a modest stock build last week.
In the Middle East, geopolitical risk intensified after several oilfields in Iraqi Kurdistan came under drone attack on Wednesday, resulting in a loss of approximately 200,000 barrels per day of production, according to local sources. While the Kurdistan region has not been exporting crude to global markets since the vital pipeline shut down more than two years ago, instability in the region adds an extra layer of risk premium to prices globally.
There was also evidence of increased demand for refined products: the September futures spread between low-sulfur gasoil and Brent has widened nearly 7% this month—a key indicator for diesel production profitability.
iXDeep Analysis: Financial Market Implications
The interplay between energy prices, US interest rate speculation, and political rhetoric has far-reaching consequences for global markets:
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Forex Markets:
The session illustrated how sensitive the EUR/USD and other major currency pairs are to Federal Reserve policy speculation. As rumors about Powell’s future swirled, the resulting dollar volatility caused dramatic shifts in trading strategies, risk appetite, and hedging behavior. For currency traders, periodical uncertainty tied to central bank leadership can create sudden profit opportunities—but can also trigger stop-losses on both sides.
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Commodities:
Every dollar move reverberates through commodities like oil, gold, and grains. A weaker dollar typically lifts commodity prices and vice versa. Today’s action is a reminder that traders need to watch not just physical market fundamentals, but shifting sands in central banking and US politics.
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Cryptocurrency:
The ongoing uncertainty and potential instability in traditional financial leadership often spill over into the digital asset sphere. Bitcoin and Ethereum, in particular, have seen inflows as traders buffer portfolios against heightened volatility in fiat currencies and the perceived risk of US political intervention in monetary policy. A drawn-out Trump vs. Powell saga could encourage further safe-haven buying in crypto, particularly if risk-off sentiment persists.
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Stock Markets:
Large-cap energy equities, international ETFs, and oilfield service providers all reacted quickly to the fiscal and supply headlines. The sector remains acutely sensitive to both Washington’s policy rumors and geopolitical risks from oil-producing regions.
In summary, the current turbulence in oil prices is less about tanks and pipelines, and more about central banks and political tweets. All eyes remain firmly on the Fed—and on whoever sits in the chair.
