Key Takeaways:
- The price of crude oil remains under the $90 mark per barrel.
- OPEC+, led by Saudi Arabia, wants to cut oil supplies further.
- The changes in oil prices will impact Bitcoin (BTC) and the larger crypto market.
YEREVAN (CoinChapter.com) — Oil prices increased at the start of the week, driven by the anticipation of OPEC+ maintaining tight supplies. According to a recent Reuters report, speculation surrounding the US Federal Reserve’s potential cessation of its aggressive interest rate hike campaign is also contributing to the hike.
Meanwhile, the spike in crude oil prices threatens to push the price of Bitcoin (BTC) down. This could throw the already-struggling cryptocurrency market into further uncertainty.
The decline in crude oil prices has been ongoing since June of last year, when it peaked at $124 per barrel. Over the past months, prices have consistently remained below the $90 threshold.
On September 1, crude ended the trading day at a closing price of $88.55 per barrel. The market value had settled for about $88.40 at the time of writing. It reached an intraday high of $89.11, according to OilPrice.Com.
Meanwhile, the US West Texas Intermediate crude (WTI) traded at $85.36 while writing.
Saudi Arabia-led OPEC+ to push oil prices higher?
Saudi Arabia has bolstered oil prices by implementing substantial voluntary output cuts as part of the OPEC+ production agreement. The group includes members of the Organization of the Petroleum Exporting Countries (OPEC) and allied nations such as Russia, Bahrain, and Malaysia.
According to the Reuters report, Saudi Arabia is expected to continue its voluntary cut of 1 million barrels per day (bpd) for a fourth consecutive month, extending into October.
In further bad news for the West, Moscow has agreed with OPEC+ partners regarding continued export cuts in October. This was widely reported by the Russian state-owned news agency TASS.
Deputy Prime Minister of Russia Alexander Novak announced that the details of the new deal will be released next week.
“Yes, we have reached an agreement. But we will publicly announce the main terms next week,”
he responded when President Vladimir Putin inquired about the government’s success in negotiating a reduction in Russian oil exports to international markets in partnership with OPEC.
Moscow has already declared its intention to reduce exports by 300,000 barrels per day (bpd) for September. These cuts follow a previous cut of 500,000 bpd in August.
Meanwhile, the economic slump in China, the largest importer of crude oil, has also adversely impacted the market. The country’s demand has dropped following the Covid-19 pandemic lockdown, further pushing the crude oil prices down.
However, the unexpected expansion in manufacturing activity in August has generated optimism in the market.
Oil price increase comes as bad news for Bitcoin (BTC)
The prospects of increasing global crude oil prices can have several indirect impacts on the cryptocurrency market. The price of Bitcoin (BTC) could fall further.
When writing, BTC, which leads the digital currency pack, exchanges hands at around $25,700. While year-to-date, the token has rallied over 55%, it remains about 62% below its all-time high of $68,789 in November 2021.
Investors often see oil prices as an indicator of global economic health. When oil prices remain high and stable, it can boost investor confidence in traditional financial markets. This could divert some investment away from non-conventional markets, such as cryptocurrencies.
Conversely, a sharp drop in the price of crude oil can create uncertainty and lead investors to seek alternative assets like cryptocurrencies as a hedge against economic instability.
Oil is a significant component of many economies, and its price fluctuations can influence inflation rates.
Central banks often adjust their monetary policies in response to changes in inflation. When oil prices surge, the cost of transporting goods and services increases. This rise in the cost of living exacerbates inflation by increasing the final prices that customers must pay for all products.
Central banks often implement a tighter monetary policy to curb inflation, which could impact cryptocurrency markets.
Cryptos like BTC are sometimes considered digital gold, and investors turn to them during inflationary periods.
The potential oil supply cut by OPEC+ could send the crypto market into an extended period of uncertainty.
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