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Oil prices inched down on Monday as concerns of higher-for-longer interest rates resurfaced and lifted the dollar, offsetting support for oil markets from geopolitical tensions and OPEC+ supply cuts.
Brent crude futures slipped 5 cents to $85.19 a barrel by 04:17 GMT, after settling down 0.6% on Friday. US West Texas Intermediate crude futures were at $80.66 a barrel, down 7 cents.
“The US dollar has opened bid this morning and appears to have broken higher following better US PMI data on Friday night and political concerns ahead of the French election,” said Tony Sycamore, a Sydney-based markets analyst at IG.
A stronger greenback makes dollar-denominated commodities less attractive for holders of other currencies.
The dollar index, which measures the greenback against six major currencies, climbed on Friday and was up slightly on Monday after purchasing managers index data showed US business activity was at a 26-month high in June.
However, both benchmark crude contracts gained about 3% last week on signs of stronger oil products demand in the US, world’s largest consumer, and as OPEC+ cuts kept supply in check.
US crude inventories fell while gasoline demand rose for the seventh straight week and jet fuel consumption has returned to 2019 levels, ANZ analysts said in a note.
ING analysts led by Warren Patterson said speculators have also become more constructive towards oil into summer and increased their net-long positions in ICE Brent.
“We remain supportive towards the oil market with a deficit over the third quarter set to tighten the oil balance,” the analysts said in a note.
Geopolitical risks in the Middle East from the Gaza crisis and a ramp-up in Ukrainian drone attacks on Russian refineries are also underpinning oil prices.
In Ecuador, state oil company Petroecuador has declared force majeure over deliveries of Napo heavy crude for exports following the shutdown of a key pipeline and oil wells due to heavy rains, sources said on Friday.
In the US, the number of operating oil rigs fell three to 485 last week, their lowest since January 2022, Baker Hughes said in its report on Friday.
