Oil Prices Dip Amid Rising Interest Rate Concerns
In a recent report by Reuters, oil prices experienced a slight decrease on Monday as worries about higher interest rates resurfaced, causing the dollar to strengthen. This offset any positive impact on oil markets from geopolitical tensions and supply cuts by OPEC+.
Brent Crude and US WTI Prices
Brent crude futures dropped by 3 cents to $85.21 per barrel, while US West Texas Intermediate crude futures were at $80.71 per barrel, down 2 cents.
Impact of Stronger Dollar
According to Tony Sycamore, a markets analyst at IG, the US dollar gained strength due to better US PMI data and political concerns ahead of the French election. A stronger dollar makes dollar-denominated commodities less appealing to holders of other currencies.
Factors Contributing to Oil Market Movement
Despite the decline in oil prices, both benchmark crude contracts saw a 3% increase last week. This was driven by stronger oil products demand in the US and supply cuts by OPEC+. US crude inventories fell, gasoline demand rose, and jet fuel consumption returned to pre-pandemic levels.
Analysts’ Outlook on Oil Market
ING analysts are optimistic about the oil market, citing a deficit over the third quarter that is expected to tighten the oil balance. Speculators have also increased their net-long positions in ICE Brent, indicating a positive sentiment towards oil.
Geopolitical Risks and Supply Disruptions
Geopolitical tensions in the Middle East and supply disruptions in Ecuador have also supported oil prices. The declaration of force majeure by Petroecuador over Napo heavy crude exports due to pipeline shutdowns has added to market uncertainties.
US Oil Rig Count
In the US, the number of operating oil rigs fell to 485, the lowest since January 2022, according to Baker Hughes. This decline in rig count could have implications for future oil production levels.