RIYADH: Oil prices fell more than 1% on Monday, as worries over China’s sluggish economic recovery and a stronger dollar offset seven weeks of gains due to tighter supply from output cutbacks by the Organization of the Petroleum Exporting Countries and its partners, known as OPEC+.
Brent crude futures were down $1.07, or 1.2 percent, to $85.74 per barrel at 9:31 a.m. Saudi time, while US West Texas Intermediate crude was down 1.3 percent to $82.12 per barrel.
Prices fell as the US dollar index extended gains following a somewhat larger increase in US producer prices in July, which increased Treasury yields amid forecasts that the Federal Reserve is nearing the end of its rate hike cycle.
A rising dollar reduces demand for oil by making it more expensive for buyers holding foreign currencies.
“For some time now, crude has been in overbought territory, defying expectations of a correction.” “It has been solely focused on US economic optimism, to the exclusion of the increasingly stronger headwinds blowing in the eurozone and China,” Vandana Hari, founder of oil market monitoring service Vanda Insights, said.
“A rebalancing is overdue, but it may require a reality check in US markets,” Hari said.
Oil prices may remain range-bound this week due to China’s slow economic recovery and a higher US dollar, but OPEC+ has stated that it will do everything it takes to cut supply and stabilize markets, according to CMC Markets analyst Tina Teng.
The International Energy Agency said in its monthly report on Friday that supply curbs by Saudi Arabia and Russia are projected to erode oil stocks during the rest of the year, potentially driving prices further higher.
Source: Reuters