Oil: Bearish setup as supplies normalise – Danske Bank

FXStreet Insights Team FXStreet

Danske Research Team notes that Brent crude has dropped back toward USD 72 and near pre-war levels, with Oil pressured by a stronger US Dollar and growth concerns rather than supply alone. They argue that a hawkish Federal Reserve (Fed) and improving supply outlook have created a bearish backdrop, and sees scope for further Oil price declines as global supplies normalise.

Brent slide driven by USD and supply

"In commodities, Brent crude plummeted yesterday, trading around USD72/bbl. this morning and close to the pre-war levels."

"While much attention in the oil market remains on the supply situation, we think the stronger USD and associated growth worries are behind the drop."

"The hawkish turn by the Fed and rosier supply outlook have created a bearish environment for oil."

"While the USD rally has come a long way, traffic through the Strait of Hormuz remains low."

"Hence, oil prices could potentially fall further as global supplies normalise."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD hits eight-month lows below 0.6850 amid bullish USD

AUD/USD stays defensive below 0.6850, hitting an eight-month low in the Asian session on Thursday as the possibility of a steeper Fed rate hike in December helps the US Dollar hold near its highest level since April 2025. Geopolitical uncertainty also supports the safe-haven buck, while the RBA’s cautious, on-hold stance limits the Aussie.

USD/JPY eases from near 160.00 amid looming intervention risks, BoJ hike bets

USD/JPY retreats slightly from an over two-month high as the recent surge back to the 160.00 psychological mark prompted verbal warnings from Japanese authorities and sparked fears of direct FX intervention. Moreover, data showed that Japan’s wholesale inflation picked up again in October, strengthening the case for a BoJ hike in December and lifting the Japanese Yen. However, a bullish US Dollar, bolstered by odds of a jumbo Fed rate hike in December, could cap the pair's downside.

Gold rebounds loses steam at $4,000 as hawkish Fed bets support USD

Gold's rebound falters at $4,000 in the Asian session on Thursday. The US Dollar regains traction and sits at its highest level since April 2025, weighing on the commodity. Fed rate hike expectations and the possibility of a jumbo 50 bps rate increase favor USD bulls, keeping the non-yielding bullion capped at $4,000.

Why the US Dollar's rally isn't as strong as it looks

The US Dollar Index (DXY) is back at an 18-month high, but most of its climb since August is the Euro (EUR) falling. Against a wider group of trading partners, the Dollar has gained half as much, and the Federal Reserve (Fed) has raised rates once this year. The US Dollar Index, which measures the Dollar against six other currencies, is trading near 103.

UK GDP is set to show that the economy continued growing in Q3

The highlight of the United Kingdom’s economic calendar this week will be the preliminary estimate of third-quarter Gross Domestic Product, which the Office for National Statistics will release on Thursday. The market is bracing for 0.7% growth in the three months to September, following 0.5% growth in the second quarter of 2026, with the annual rate accelerating to 1.9%, from 1.4% in the previous month.

What the US CPI headline doesn’t tell you about inflation

Brent crude has fallen about a third since mid-October on hopes the Iran war is ending, but diesel, freight and fertiliser costs haven't followed. Those costs reach US consumer prices in stages through 2027 and could keep inflation high after gasoline gets cheaper.