Oil prices fell on Monday as the US dollar continued to be buoyed by the prospect of higher-for-longer interest rates, weighing on sentiment for commodities priced in the greenback ahead of further hints on the country’s inflation and the Federal Reserve’s monetary policy plans this week.
Brent crude oil futures for August delivery dropped 0.20% to $85.07 per barrel after losing 0.60% on Friday, while the US West Texas Intermediate (WTI) crude futures slipped 0.09% to $80.66 per barrel.
Traders also participated in some profit-taking following the oil markets’ robust performance in the last two weeks, which was driven by positive demand views and escalating geopolitical tensions in the Middle East and Europe.
The two benchmarks had logged a 3.00% increase the week earlier on a possible demand surge in top consumer US and as output cuts by the Organization of Petroleum Exporting Countries (OPEC) and its allies curbed supply.
US crude inventories declining 2.5 million barrels in the week ending June 14 to 457.1 million barrels and gasoline consumption in the country rising to 9.4 million barrels per day (bpd) in the period, its highest since the pandemic ended, also fueled a more optimistic outlook for crude.
Dollar Extends Gains to Pressure Oil, Commodities Markets
The US dollar remained resilient on Monday as traders eased their expectations for early interest rate cuts from the Fed.
The dollar index climbed 0.05% to 105.85, trading near a two-month peak against its peers. The index rose 0.41% overnight the week prior after the Swiss National Bank (SNB) announced its second rate reduction this year, and the Bank of England (BoE) signaled a similar move in August.
A stronger greenback limits gains in dollar-denominated commodities and hurts global oil demand by further raising their prices for foreign buyers.
The dollar traded higher on Friday following the preliminary US S&P Global Composite Purchasing Managers’ Index (PMI) rising to 54.6 in June from 54.5 in May, indicating the private sector’s ongoing business activity growth.
Traders will closely watch the Fed’s chosen inflation measure, the Personal Consumption Expenditures (PCE) Price index data due on Friday.
The reading is expected to show US inflation remaining above the central bank’s 2% annual target, reinforcing plans to continue higher interest rates.
