Oil declines with strong dollar dragging prices down

By Sibel Morrow

Oil prices drifted lower on Monday over strong US dollar pressure as investors await Thursday’s release of the Personal Consumption Expenditures (PCE) price index, the US Fed’s preferred measure of price fluctuations and an importance gauge in its next monetary policy decision.

International benchmark Brent crude traded at $80.60 per barrel at 10.33 a.m. local time (0733 GMT) for a 0.25% decrease from the closing price of $80.80 a barrel in the previous trading session.

American benchmark West Texas Intermediate (WTI) traded at $76.24 per barrel at the same time for a 0.33% loss after the previous session closed at $76.49 per barrel.

The rising value of the US dollar, which is making oil more expensive for holders of foreign currencies and possibly reducing demand, was the primary factor behind the bearish market sentiment at the start of the week for both benchmarks.

The rise in the US dollar came amid expectations that the Fed would postpone interest rate cuts as the earnings of US multinational corporation and technology company Nvidia ignited a rally across global stock markets.

Investors are awaiting the Fed's preferred measure of inflation, the PCE price index, which will be released on Thursday.

Markets are also awaiting oil demand data from the US Energy Information Administration (EIA) to be released on Wednesday. The country’s stockpiles showed an increase of around 3.5 million barrels last week; however, if stocks continue to rise, oil prices are expected to further decline.

Nevertheless, because of the associated supply risks, the unfolding geopolitical tension in the Middle East is driving up prices.

Yemen’s Houthi group said late Saturday that it would allow the British ship Rubymar sunk in the Gulf of Aden to be salvaged in exchange for bringing relief aid into the Gaza Strip.

On Sunday, a Yemeni civilian was killed and six others injured in US and British attacks in the southern city of Taizz.