Dollar Weakness Propels Crude Oil Higher Amid Policy Shifts

Crude oil extended gains on Friday, with WTI Crude Oil for December delivery climbing $0.38 to $59.81 per barrel (a 0.64% increase). The rally was primarily driven by U.S. dollar depreciation and mounting U.S. government support for conventional energy sources, despite persistent oversupply signals and muted demand conditions.

The Dollar Factor

The U.S. dollar index dropped to 99.53, declining 0.16 points on the day. A weaker greenback traditionally lifts commodity prices denominated in dollars, making them more attractive to international purchasers. With the ongoing government shutdown now in its 38th day creating economic headwinds, expectations for additional Federal Reserve rate cuts have intensified—a development that could further pressure the dollar and support oil valuations.

Policy Tailwinds Supporting Energy Demand

A notable shift emerged from an energy forum in Athens, where U.S. officials emphasized the global economy’s need for dependable fossil fuel supplies rather than renewable alternatives. This policy stance reflects Washington’s strategic interest in capturing market share previously held by Russian energy exports into Western Europe.

The U.S. currently produces over 20 million barrels daily, representing approximately 5% of global crude oil share in worldwide production. This production capacity underscores America’s growing role as an energy supplier on the international stage.

Supply Dynamics and OPEC+ Decisions

OPEC+ announced a modest 137,000 barrel-per-day production increase for December, while signaling a pause on further increments through Q1 2026. October data revealed OPEC member nations pumping 28.43 million barrels daily, up 30,000 bpd from September, with Saudi Arabia and Iraq leading the increases.

However, crude oil continue to face headwinds. The U.S. Energy Information Administration reported that commercial crude oil inventories surged 5.2 million barrels for the week ending October 31, reaching 421.2 million barrels—substantially exceeding analyst expectations of a 2.4 million-barrel drawdown.

Geopolitical Supply Disruptions

U.S. sanctions targeting Russia’s primary oil producers—Rosneft and Lukoil, which together account for roughly 50% of Russian crude output—have disrupted supply flows. These entities have curtailed purchases, creating supply uncertainties. Additionally, record volumes of crude entering floating storage reflect anti-Russian tanker sanctions and surplus Middle East shipments.

In response, Saudi Arabia, the world’s largest crude exporter, reduced its December pricing for Asian buyers, signaling demand weakness in the region.

Market Outlook

Despite oversupply concerns and dampened demand fundamentals, crude oil benefited from the convergence of dollar weakness and pro-fossil fuel policy momentum. The interplay between monetary policy expectations, geopolitical supply disruptions, and shifting energy preferences will likely remain key drivers for crude oil price movements in the near term.