Global oil prices edged lower on Monday, halting a five-session rally, as the surging US dollar weighed on market sentiment ahead of critical economic data from the Federal Reserve and US labor market.
According to a Reuters report, Brent Crude futures fell by $0.28, or 0.4 percent, to $76.23 per barrel as of 0800 GMT, retreating from their highest close since mid-October. Similarly, US West Texas Intermediate (WTI) crude dropped $0.27, or 0.4 percent to $73.69 per barrel after hitting a three-month peak last Friday.
The recent upward momentum in oil prices was driven by increased demand tied to colder weather in the Northern Hemisphere and fiscal stimulus measures in China aimed at boosting its slowing economy.
However, the rally lost steam as the US dollar strengthened, making oil, priced in dollars, more expensive for international buyers.
“The dollar’s strength remains a significant headwind for oil markets,” observed Priyanka Sachdeva, a senior market analyst at Phillip Nova. The dollar hovered near a two-year high on Monday, dampening investor enthusiasm.
Market participants are now focused on upcoming economic indicators that could shape Federal Reserve policy and its implications for energy demand.
The minutes from the Fed’s latest meeting, expected on Wednesday, and the December payroll report, due Friday, are anticipated to provide crucial insights into the central bank’s monetary policy outlook.
Adding to the market dynamics, Saudi Aramco, the world’s largest oil exporter, announced its first price increase for crude deliveries to Asia in February after three consecutive months of cuts. This decision reflects growing confidence in demand recovery in the region, despite persistent global uncertainties.
Geopolitical factors are also influencing market sentiment. Potentially stricter sanctions on Iranian and Russian oil exports could disrupt supply flows.
Analysts estimate that if additional sanctions are imposed, Iran’s crude production could decline by 300,000 barrels per day, dropping to 3.25 million barrels per day in the second quarter.
Meanwhile, US domestic production shows mixed signals. Baker Hughes reported last week that the US oil rig count dipped by one to 482, indicating a possible slowdown in future output.
Despite these developments, analysts caution about a looming supply surplus in 2025. Non-OPEC supplies, including potential growth in US production, are expected to offset global demand increases.
Patrick De Haan, head of petroleum analysis at GasBuddy, remarked in December that OPEC’s ability to influence global oil prices has significantly diminished.