The upward trend in oil prices came to a halt on Monday after seven consecutive weeks of gains. This reversal can be attributed to a number of factors, including the strengthening US dollar and concerns about China’s economic recovery.
Brent crude futures fell by 29 cents, or 0.3%, to $86.52 per barrel by 00:33 GMT. US West Texas Intermediate crude also dropped by 24 cents, or 0.3%, to $82.95 per barrel.
The price of oil declined on Monday as the US dollar index rose. The dollar’s strength was attributed to higher US producer prices in July, which led to higher Treasury yields. This occurred despite expectations that the Federal Reserve would not raise interest rates as much as previously thought.
Factors such as China’s gradual economic recovery and the strengthening US dollar could exert downward pressure on prices. However, OPEC+ remains committed to taking the requisite measures to maintain supply restrictions and ensure market stability.
The joint efforts of OPEC+ members, including supply cuts from Saudi Arabia and Russia, are anticipated to help reduce oil inventories for the remainder of the year. This could further drive up prices, as highlighted in the Energy Agency’s monthly report released on Friday. Notably, the spread between the first and second months of Brent oil prices remained unchanged on Monday, having settled at 67 cents on the previous Friday. This was the widest spread since March.
On Sunday, a Russian warship engaged in a confrontation in the Black Sea by firing warning shots at a cargo ship. This incident has heightened tensions in a critical region for raw material exports, affecting both Ukraine and Russia.
ANZ analysts remarked on this development, emphasising the heightened risk of trade disruptions in the Black Sea region. They noted that around 15-20% of Russia’s oil sales are transported through the Black Sea.
The Baker Hughes weekly report indicated that the number of active oil rigs in the United States remained unchanged at 525 in the previous week, following eight consecutive weeks of decline.