As the U.S. Federal Reserve prepares to release key economic reports, including job numbers, later this week, oil prices dropped on Monday after being influenced by a strong U.S. dollar.
At 05:43 PM Bangkok time, Brent crude futures dropped 1 cent, or 0.01%, to $76.5 a barrel, while US West Texas Intermediate crude also slid 1 cent, or 0.01%, to $73.95 a barrel.
Previously, Oil prices had risen for five sessions due to increased demand from colder weather and China’s fiscal stimulus to revitalize its economy. However, investors are cautious about the strength of the dollar, according to Priyanka Sachdeva, a senior market analyst at Phillip Nova.
As the dollar became strong and almost reached a two-year peak, the greenback-priced commodity became more expensive.
There are also other matters investors must consider. Some plan to wait for economic news for insights into the Federal Reserve’s rate outlook and energy consumption, with the minutes from the Fed’s last meeting due on Wednesday, while on Friday, the December payrolls report is expected to be released.
Another concern is the potential impact on Iranian and Russian oil shipments, as both may face tougher sanctions. For Russia, the Biden administration plans to impose additional sanctions targeting its oil revenues. Meanwhile, Goldman Sachs predicts that under incoming President Donald Trump’s policies, Iran’s production and exports will decline by the second quarter due to tighter sanctions.
Additionally, for the first time in three months, Saudi Aramco, the world’s top oil exporter, has raised crude prices for Asian buyers for February.
As for the current situation, OPEC production could fall by 300,000 barrels per day to 3.25 million bpd by the second quarter, while the U.S. oil rig count decreased by one to 482 last week, according to Baker Hughes. The rig count is a key indicator of future oil production.
Nevertheless, the global oil market still faces challenges, as analysts expect the surplus from non-OPEC countries to offset the rise in global demand. Additionally, increased production under Trump could further complicate the situation.
