Danske Bank Turns Bearish on Brent as Dollar Weighs

Key Moments

Brent crude has retreated toward USD 72 per barrel, approaching levels seen before the war.
Danske Research Team highlights a stronger USD and growth worries, rather than supply alone, as key drivers of the recent Brent decline.
The bank sees room for additional downside in oil prices as global supplies normalize and a hawkish Fed maintains a bearish setup.

Market Context and Price Action

Danske Research Team reports that Brent crude has reversed earlier gains and moved back toward USD 72 per barrel, placing it close to its pre-war range. The team notes that the current weakness in oil is being shaped more by currency and macroeconomic dynamics than by supply disruptions alone.

According to the analysis, the combination of a firmer US Dollar and heightened concerns about economic growth has exerted notable downward pressure on crude benchmarks, contributing to the latest leg lower in Brent.

Drivers Behind the Brent Decline

The team characterizes the recent slide in Brent as being driven primarily by the foreign exchange backdrop and the perception of improving supply conditions. While market participants continue to watch the supply side, Danske Research Team emphasizes that the stronger USD and related growth anxieties are playing a central role in the move.

Factor	Danske Bank View
Brent price level	Trading around USD 72/bbl and near pre-war levels
US Dollar	Stronger USD seen as a key driver of the drop in oil
Federal Reserve stance	Hawkish turn contributing to a bearish environment for oil
Supply outlook	Described as rosier, with global supplies seen normalizing
Strait of Hormuz traffic	Described as remaining low

Fed Policy, USD Strength, and Supply Normalization

Danske Research Team argues that the recent hawkish shift by the Federal Reserve has reinforced US Dollar strength and amplified concerns about growth, together creating a more challenging environment for oil prices. At the same time, an improving view on supply has further undermined the bullish case for crude.

The team notes that despite the extent of the recent USD rally, traffic through the Strait of Hormuz remains low. Against this backdrop, and with global supplies seen on a path toward normalization, Danske Research Team believes there is still potential for oil prices to decline from current levels.

Selected Commentary from Danske Research Team

“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.”