Oil prices continued their downward trajectory on Monday, amplifying losses from the previous session. The decline was attributed to a strengthening U.S. dollar and growing apprehensions in the market regarding higher-than-anticipated inflation.
By 6:03 GMT, Brent crude futures saw a 0.42 percent decline to $81.28 per barrel. Meanwhile, U.S. West Texas Intermediate crude futures (WTI) saw a 0.51 percent decrease to $76.10 per barrel.
This decline follows losses last week when Brent declined about 2 percent and WTI fell more than 3 percent.
Dollar strength
The strengthening U.S. dollar played a pivotal role in the downturn of oil prices, making oil more expensive for holders of other currencies. Analysts highlighted the retreat of the risk-on sentiment, particularly after the recent rally led by Nvidia. They attributed this shift to the expectations of prolonged higher interest rates in the U.S., which bolstered the dollar and exerted pressure on commodity prices.
Oil prices have been fluctuating within the range of $70 to $90 a barrel since November, influenced by factors such as rising U.S. supply and concerns regarding Chinese demand despite ongoing OPEC+ supply cuts amid geopolitical tensions.
Price projections
Goldman Sachs indicated a modest geopolitical risk premium for oil prices due to tensions in the Red Sea, adding $2 per barrel to Brent prices. Despite this, the bank raised its summer peak oil prices forecast from $85 per barrel to $87 per barrel due to disruptions in the Red Sea.
Additionally, Qatar’s decision to increase liquefied natural gas production amidst a recent decline in global prices adds to global energy supplies.
Goldman Sachs maintains a positive outlook on oil demand growth for 2024, expecting it to rise by 1.5 million barrels per day. However, it had cut China’s forecast while raising projections for the U.S. and India.
Read: Gold prices retreat from recent highs amid Fed rate uncertainty
Future outlook
Looking ahead, analysts anticipate a potential decrease in oil stockpiles in the U.S. as refineries resume operations post-maintenance, which could support prices. However, the market remains cautious amidst uncertainties surrounding inflation, interest rates, geopolitical tensions, and demand dynamics, all of which continue to shape oil price movements in the near term.
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