Oil prices rose in European trade for the third straight session as the energy crisis in Europe escalates as Russian gas supplies to several countries are cut through Ukraine.

Prices are also buoyed by a drop in US oil production, the first such decrease since January.

Oil Prices

US crude prices rose 1.9% to $108.68 a barrel, while Brent climbed 1.4% to $109.93 a barrel.

US crude rose 1% yesterday, while Brent added 0.5%, the second profit in a row.

Energy Crisis

Russian gas supplies were cut or reduced to several European countries after Ukrainian troops cut off a major pipeline and blamed Russian troops. 

This is the first such drop in supplies since the Russian invasion of Ukraine last February. 

US Production 

Official US data showed US output fell by 100 thousand bpd in the week ending May 6 to a total of 11.8 million barrels. 

This is the first such decline since January, to a total of 11.9 million bpd, a two-year high.

Dollar fell in European trade on active profit-taking away from 20-year highs amid strong bets on multiple Fed rate hikes this year.

The dollar is still heading for the sixth weekly profit in a row amid strong haven demand.

The Dollar Index

The dollar index fell 0.3% on Friday to 104.48, after closing up 0.75% yesterday, the sixth profit in a row, with a 20-year high at 104.92.

The dollar index is up 0.8% so far this week on track for the sixth weekly profit in a row, the longest such streak this year.

US inflation data astounded expectations once more and paved the way for a rate hike next month.

Bullish remarks by Fed officials have all but guaranteed several 0.50% rate hikes this year.

Estimates

Now analysts expect the dollar to hit fresh 20-year highs after the current correction takes its course for profit-taking. 

Gold prices took a hit in European trade to three-month lows, sharpening losses for yet another session as the dollar strengthens, with gold prices now heading for the fourth weekly loss in a row. 

Gold Prices

Prices slid over 0.6% to $1,810 an ounce, the lowest since February 7, after closing down 1.6% on Thursday as dollar spiked. 

Gold is down 4% this week, on track for the fourth weekly loss in a row, the longest such streak this year.

US Dollar

The dollar index is trading near 20-year highs at 104.92 against a basket of major rivals. 

US inflation data astounded expectations once more and paved the way for a rate hike next month.

Estimates 

Now analysts expect gold to give up the $1830 barrier, and potentially hit the important barrier of $1800.

The SPDR 

Gold holdings at the SPDR Gold Trust fell 5.8 tones yesterday, the sixth decline in a row, to a total of 1,060 tones.

Sterling rose in European trade after sustaining heavy losses recently, holding above two-year lows against dollar, while still on track for the fourth weekly loss in a row. 

GBP Pricing

GBP/USD rose 0.3% to 1.2231, after losing 0.4% on Thursday, the sixth loss in a row, marking two-year lows at  1.2165.

Sterling is down 1% this week on track for the fourth weekly loss in a row. 

Bearish Data

UK data showed growth at 0.8% in the first quarter, missing estimates of 1%, and down from 1.3% in the previous quarter.

On a monthly basis, UK economy contracted 0.1% in March, compared to a 0.1% growth rate in February.

Such data cut down chances of several more UK rate hikes in 2022.

BoE Estimates

Bank of England decided to hike rates by 25 basis points last week to 1%, the fourth increase in a row.

The members are preparing for another 25 basis points, however they warned from a recession if rates were increased by 0.50%.

It didn't stop at this, the BoE went as far as predicting an actual recession next year by 0.25%.

US Dollar

The dollar is trading near 20-year highs once more at 104.92 against a basket of major rivals.

US inflation data astounded expectations once more and paved the way for a rate hike next month.

Estimates

As for the pound, analysts now expect it to fall as low as 1.2 while potentially even piercing that important barrier in the months to come.