Oil prices fell on Monday, extending losses from the previous session after the dollar rose on market concerns that higher-than-expected inflation could delay cuts to higher U.S. interest rates that are limiting growth in global fuel demand.
Brent crude futures fell 35 cents, or 0.4%, to $81.27 a barrel, while WTI fell 35 cents, or 0.5%, to $76.14 a barrel.
Long-term high-interest rate expectations raise the US dollar, pressuring commodity prices and risk appetite declines. A stronger dollar makes oil more expensive for those who hold other currencies, reducing demand.
Brent fell around 2% last week and WTI fell more than 3% on indications that US interest rate cuts could be delayed by two months due to a rise in inflation.
Oil prices have been stuck between $70 and $90 a barrel since November as OPEC+ supply cuts, rising U.S. supply, concerns about weak demand in China, and geopolitical conflicts offset each other.
The geopolitical risk premium resulting from Yemeni Houthis’ attacks on ships in the Red Sea had a modest impact on Brent, rising only $2 per barrel, according to analysts.
However, disruptions in the Red Sea caused a larger-than-expected decline in stocks held by member countries of the Organization for Economic Co-operation and Development (OECD), pushing the summer peak price from $85 to $87 per barrel.
Oil demand is still expected to grow by 1.5 million barrels per day (bpd) in 2024, but while China’s forecast is lower, it is high for the US and India. Meanwhile, strong non-OPEC supply growth is likely to keep pace with nearly robust global demand growth.
As the Israel-Hamas conflict continues in the Middle East, negotiators on behalf of the United States, Egypt, Qatar, and Israel agreed on the basic lines of a hostage agreement during talks in Paris but are still in the negotiation phase. Netanyahu said that it is not yet clear whether the agreement will be realized or not.
In addition to global energy supplies, Qatar will further increase its production of liquefied natural gas despite the recent sharp decline in global prices.
It is possible to predict that oil stocks will start to decrease in the coming weeks as refineries return from maintenance in the USA, which may provide some support to prices.
