Home NewsCommodities News Oil falls more than 1.5% on demand fears and strong dollar By Reuters

Oil falls more than 1.5% on demand fears and strong dollar By Reuters

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Oil falls more than 1.5% on demand fears and strong dollar By Reuters



© Reuters. FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, US April 21, 2020. REUTERS/Drone Base

By Alex Lawler

LONDON (Reuters) – Oil fell by more than 1.5% on Monday, pressured by expectations of weaker global demand and by US dollar strength ahead of possible large increases to interest rates, although supply worries limited the decline.

Central banks around the world are certain to increase borrowing costs this week and there is some risk of a blowout 1 percentage point rise by the US Federal Reserve. [MKTS/GLOB]

“The upcoming Fed meeting and the strong dollar are keeping a lid on prices,” said Tamas Varga of oil broker PVM.

for November delivery fell $1.49, or 1.6%, to $89.86 a barrel at 1002 GMT. US West Texas Intermediate (WTI) for October dropped $1.57, or 1.8%, to $83.54.

A British public holiday for the funeral of Queen Elizabeth was expected to limit activity on Monday.

Oil also came under pressure from hopes of an easing of Europe’s gas supply crisis. German buyers reserved capacity to receive Russian gas via the shut Nord Stream 1 pipeline, but this was later revised and no gas has been flowing.

Crude has soared this year, with the Brent benchmark coming close to its record high of $147 in March after Russia’s invasion of Ukraine exacerbated supply concerns. Worries about weaker economic growth and demand have since pushed prices lower.

The US dollar stayed close to a two-decade high ahead of this week’s decisions by the Fed and other central banks. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies and tends to weigh on oil and other risk assets. [USD/]

The market has also been pressured by forecasts of weaker demand, such as last week’s prediction by the International Energy Agency that there would be zero demand growth in the fourth quarter.

Despite those demand fears, supply concerns kept the decline in check.

“The market still has the start of European sanctions on Russian oil hanging over it. If supply is disrupted in early December, the market is unlikely to see any quick response from US producers,” ANZ analysts said.

Easing COVID-19 restrictions in China, which had dampened the outlook for demand in the world’s second-biggest energy consumer, could also provide some optimism, the analysts said.

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