Dollar gets a boost from robust U.S. economic data leading to a 2% decline in Oil prices.

On May 18th, the US dollar hit a two-month high following reports of positive economic news in the country. Alongside this, unemployment claims in the US fell below expectations, further adding to the positive outlook. Many experts speculate that this could lead to a potential rate hike by the US Federal Reserve in June.

In contrast, the European Central Bank is expected to continue rate hikes, causing oil prices to fall approximately 2%. Brent futures fell by 1.5% to $75.79 a barrel, while US West Texas Intermediate (WTI) crude fell by $1.06.

The stronger dollar has contributed to the fall in oil prices, making fuel more expensive for those holding other currencies. Despite this, traders have priced in a 20% chance that the Fed will increase rates at its June meeting. This is a significant change from just a month ago, when traders were expecting a rate cut.

China, the world’s largest oil importer, has also experienced a downturn following weaker-than-expected growth in industrial output and retail sales, indicating a potential loss in economic momentum. On the supply side, Saudi crude oil exports rose by approximately 1% to 7.52 million barrels per day, while daily production decreased in March.

Despite the challenges faced by the oil industry, many experts continue to see economic resilience as good news for the US economy, even if it means a hit to the oil demand outlook.

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