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Crude Oil prices slipped lower Monday, weighed by a stronger U.S. dollar and continued concerns that rising interest rates will stunt global economic growth.
U.S. oil futures were trading 1% lower at $75.53 per barrel by 09:40 ET (14:40 GMT), while the Brent contract was down 0.9% at $82.07 per barrel.
A number of positive U.S. economic data, including Friday’s core PCE index, strengthened the belief that the Federal Reserve will need to raise interest rates further and keep them high for a considerable amount of time. As a result, crude oil futures have had a difficult start to the week, pressured by the dollar trading close to a seven-week peak on Monday.
When the dollar is strong, oil and other goods in U.S. dollars are more expensive for overseas consumers.
The most recent U.S. inflation report “has renewed concerns about the Federal Reserve raising interest rates in the near term and overshadowed the supply interruptions from the Druzhba oil pipeline in Europe,” according to analysts at ING in a note.
Russia halted oil supplies to Poland via the Druzhba pipeline, according to Polish refiner PKN Orlen, over the weekend.
Although this action came soon after Poland announced it had transferred its first Leopard tanks to Ukraine, pipeline operator Transneft blamed it on paperwork errors.
According to ING, “the pipeline has delivered about 400Mbbls/d of crude oil into Europe.” But, because Russian crude only accounts for about 10% of the overall supply, the business claimed that the halt won’t immediately affect end consumers. However, longer disruptions to the transit route could.
Russia, the third-largest crude producer in the world, is planning to reduce oil shipments from its western ports by up to 25% in March, which is more than the 500,000 barrel supply cut that Moscow had previously declared.
The latest statistics from Baker Hughes indicated that the U.S. oil rig count decreased for a second consecutive week, by seven, to a total of 600 rigs, indicating that any global petroleum shortage is unlikely to be addressed by U.S. shale producers.
From the beginning of the year, there have been less active rigs in the United States. This is not a positive indication for the market considering the expansion of U.S. supply, especially given the tighter supply outlook from Russia, according to ING.
In response to a slowing domestic and global economy, Bank of America analysts reduced their projection for average U.S. crude oil prices this year from $100 to $88 per barrel.
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