Oil prices fell on Monday, retreating from their highest levels since October, as a strong U.S. dollar weighed on the market ahead of crucial U.S. economic data from the Federal Reserve and payroll reports later this week.
Brent crude futures dropped by 28 cents, or 0.4%, to $76.23 per barrel by 0800 GMT after reaching their highest since October 14 in the previous session. Similarly, U.S. West Texas Intermediate (WTI) crude slipped 27 cents, or 0.4%, to $73.69 per barrel after hitting its peak since October 11 on Friday.
The recent decline follows five consecutive sessions of gains driven by expectations of rising demand due to colder weather in the Northern Hemisphere and increased fiscal stimulus measures from China aimed at reviving its struggling economy.
However, the strengthening U.S. dollar has shifted market dynamics, making dollar-denominated commodities like oil more expensive for holders of other currencies. According to Priyanka Sachdeva, a senior market analyst at Phillip Nova, the dollar’s strength remains a key focus for investors. The dollar hovered near a two-year high on Monday.
Market participants are also closely monitoring upcoming economic indicators, including minutes from the Federal Reserve’s last meeting scheduled for Wednesday and the December payrolls report set for Friday, to gauge the outlook for interest rates and energy demand.
Meanwhile, Saudi Aramco, the world’s largest oil exporter, announced a price increase for February crude deliveries to Asian buyers, marking the first such adjustment in three months.
Concerns about potential disruptions in Iranian and Russian oil shipments loom amid the possibility of stricter sanctions. The Biden administration is reportedly preparing to impose further sanctions on Russia to target its oil revenues, including actions against tankers carrying Russian crude.
Analysts also anticipate a reduction in Iranian oil production and exports, with Goldman Sachs projecting a drop of 300,000 barrels per day to 3.25 million bpd by the second quarter due to anticipated policy changes and tighter sanctions.
Last week, Baker Hughes reported a slight decrease in the U.S. oil rig count, which fell by one to 482, signaling potential moderation in future output. However, analysts expect a surplus in the global oil market this year, driven by increased non-OPEC supply that could offset growing demand.
