The momentum of rising oil prices stopped on Monday following an uninterrupted streak of seven weeks of gains. This reversal can be attributed to a combination of factors, including the appreciating value of the US dollar and apprehensions surrounding China’s economic recovery.
Brent crude futures experienced a dip of 29 cents, equating to a 0.3% decrease, bringing the price down to $86.52 per barrel by 00:33 GMT. Similarly, US West Texas Intermediate crude saw a decline of 24 cents, or 0.3%, resulting in a barrel price of $82.95.
The price retreat coincided with the US dollar index extending its upward trajectory on Monday. This upward movement was spurred by a marginal rise in US producer prices during July, leading to higher Treasury yields. This occurred despite expectations that the momentum of the Federal Reserve’s potential interest rate hike was waning.
Factors such as China’s gradual economic rebound and the strengthening US dollar could exert downward pressure on prices. However, OPEC+ remains committed to taking necessary actions to maintain supply restrictions and ensure market stability.
The joint efforts of OPEC+ members, including supply cuts from Saudi Arabia and Russia, are anticipated to play a role in reducing oil inventories throughout the remainder of the year. This stockpile reduction could drive up prices further, as highlighted by the Energy Agency’s monthly report released on Friday. Notably, the spread between the prices of the first and second months of Brent oil remained constant on Monday, having settled at 67 cents on the previous Friday. This spread was the widest observed since March.
A Russian warship engaged in a confrontation on Sunday by firing warning shots at a cargo ship in the Black Sea. This incident has heightened tensions in a crucial region for the export of raw materials, impacting both Ukraine and Russia.
ANZ analysts addressed this development, underscoring the increased likelihood of trade disruptions in the Black Sea region. They emphasized that approximately 15-20% of Russia’s oil sales are routed through the Black Sea.
Shifting focus to the US, the Baker Hughes weekly report indicated that the number of active oil rigs remained stable at 525 in the preceding week. This stabilization follows eight weeks of consecutive declines in active oil rigs.
