Florence Tan
SINGAPORE (Reuters) – Oil prices edged down on Monday as geopolitical tensions and renewed concerns about longer-term higher interest rates offset support for the oil market from supply cuts by the Organization of the Petroleum Exporting Countries (OPEC+), boosting the dollar.
Brent crude futures were down 5 cents at $85.19 a barrel as of 0417 GMT after falling 0.6 percent on Friday, while U.S. West Texas Intermediate crude futures were down 7 cents at $80.66 a barrel.
“The US dollar opened with buying orders this morning and appears to have strengthened on improved US Purchasing Managers’ Index (PMI) figures on Friday night and political concerns ahead of the French general election,” said Tony Sycamore, Sydney-based market analyst at IG.
A strong dollar makes dollar-denominated products less attractive to holders of other currencies.
The dollar index, which tracks the greenback’s relative value against six major currencies, rose on Friday and edged up again on Monday after purchasing managers’ index data showed U.S. business activity hit a 26-month high in June.
But both benchmark crude futures rose about 3% last week on signs of strengthening demand for petroleum products in the United States, the world’s biggest consumer, and on supply being curbed by OPEC+ production cuts.
U.S. crude oil inventories fell, while gasoline demand rose for the seventh consecutive week and jet fuel consumption returned to 2019 levels, analysts at Australia and New Zealand Banking Group said in a note.
Analysts at ING led by Warren Patterson said speculators were also becoming more positive on oil heading into the summer, increasing their net long positions in ICE Brent crude.
“We continue to support oil markets as the third-quarter deficit is expected to lead to a tightening of the oil balance,” the analysts said in a note.
Geopolitical risks in the Middle East due to the Gaza crisis and increased Ukrainian drone attacks on Russian refineries are also contributing to the decline in crude oil prices.
In Ecuador, state oil company Petroecuador has declared force majeure on supplies of Napo heavy crude for export after heavy rains shut down key pipelines and wells, sources said on Friday.
The number of active oil drilling rigs in the United States fell by three last week to 485, the lowest since January 2022, Baker Hughes said in a report on Friday.
(Reporting by Florence Tan; Editing by Sonali Paul and Christian Schmollinger)
