Strengthening dollar pressures oil, but supply concerns keep prices up

The U.S. dollar is strengthening due to the Fed's hawkish policy choice. Nevertheless, oil prices remain stagnant due to general supply concerns.

According to CMC Markets analyst Tina Teng, the strengthening dollar is putting pressure on oil prices, but some market participants are also likely taking profits after recent gains.

Teng also noted that after Fed officials confirmed a rate hike, the gloomy global economic outlook could continue to have a negative impact on oil futures markets.

Nevertheless, global downside risks to supply remain high.

The European Union embargo on Russian oil supplies comes into effect on December 5, and imports of oil products will be halted in February.

According to ANZ analysts, this will also lead to a supply shortfall among OPEC members over the coming months. Organization of the Petroleum Exporting Countries (OPEC) production fell in October for the first time since June.

On the demand side, Stephen Innes, managing partner working at SPI Asset Management, believes that any signs of easing restrictions imposed because of COVID-19 in China could completely change the current situation.