Crude Oil Prices Lower On firm dollar

brent oil prices

COMMODITY (B-Trams):On Monday, gains from Russia’s plans to deepen oil supply cuts were offset by a stronger dollar and worries about recession risks, which led to a slight decline in oil prices in volatile trade.

Brent crude futures were down 30 cents, or 0.36 percent, at $82.86 a barrel at 0411 GMT, while West Texas Intermediate U.S. crude futures (WTI) were trading at $76.09 a barrel, down 23 cents, or 0.3 percent.

Friday’s closing prices for both benchmarks were up more than 90 cents.

After a slew of strong U.S. economic data reinforced the belief that the Federal Reserve will have to raise interest rates further and for a longer period of time, the dollar remained close to its seven-week high on Monday.

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For holders of other currencies, a firm dollar makes commodities priced in the U.S. currency more expensive.

Vandana Hari, the founder of oil market analysis service Vanda Insights, stated, “Crude continues to take direction from the sentiment in the broader financial markets.”

Friday’s 0.6% increase in the personal consumption expenditures (PCE) price index, following a 0.2% increase in December, brought back fears of a hawkish Fed.

Hari stated, “Crude will likely come under renewed pressure if risk-aversion continues to grow.”

According to data from the Energy Information Administration (EIA), U.S. crude oil inventories rose to their highest level since May 2021 last week, adding to the downward pressure.

Analysts at the consultancy Energy Aspects wrote in a note that “the EIA data continue to raise more questions instead of providing clarity on markets.” They were referring to the significant supply adjustment in the data that contributed to the build.

On the supply side, Russia intends to reduce oil exports from its western ports by up to 25% in March compared to February. This will go beyond the 5% reduction in production it had previously announced for the month.

Since February 24, 2022, oil prices have dropped by about a sixth each year.

Polish refiner PKN Orlen’s chief executive stated on Saturday that Russia stopped sending oil to Poland through the Druzhba pipeline.

Concerns about supply drove prices to a record high of nearly $128 a barrel, but fears of a global economic slowdown have since slowed them down.

Separately, investors are anticipating clear direction on oil demand from China’s manufacturing surveys this week. New economic policy goals and strategies will be discussed at China’s annual parliamentary meeting this weekend.

Ning Zhang, senior China economist at UBS Investment Bank, wrote in a note, “We expect the government to reiterate the priority of supporting growth and call for more policy support.”