Oil prices fell on Monday, remaining under pressure from a stronger dollar as traders awaited more data on U.S. inflation and interest rates this week. Crude markets were also subject to some profit-taking after a strong run over the past two weeks, where they had added 3 percent.
Brent oil futures expiring in August fell 0.4 percent to $84.88 a barrel, while West Texas Intermediate crude futures declined 0.4 percent to $80.41 a barrel by 21:21 ET (01:21 GMT).Â
Dollar strength weighs on oil prices
The dollar index rose 0.1 percent on Monday, extending gains from the prior week as traders priced out bets on early interest rate cuts by the Federal Reserve. The greenback was close to a two-month high against a basket of currencies.
The strength in the dollar weighed on the prices of commodities like oil that are priced in the greenback. A stronger dollar also dents international oil demand by making crude more expensive for foreign buyers. The dollar was also supported by stronger-than-expected purchasing managers index data released on Friday.
Focus shifts to key inflation data
Moreover, this week, the focus will be on the key PCE price index data, which is the Federal Reserve’s preferred inflation gauge. The reading is due this Friday and is expected to show inflation remaining well above the Fed’s 2 percent annual target, which could give the central bank more justification to keep interest rates high.
Recent gains driven by demand signals, geopolitical risks
Oil prices had been sitting on two weeks of strong gains, driven by a mix of encouraging demand signals and as worsening geopolitical conditions saw traders begin pricing in a risk premium. U.S. data showing unexpected draws in oil inventories and improved gasoline demand factored into a more positive outlook for crude.
Additionally, the growing risk of a potential war escalation in the Middle East, as well as continued clashes between Russia and Ukraine, with Kyiv targeting major Russian refineries, also spurred concerns over supply disruptions, contributing to the recent price rally.
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