Oil up following weak US dollar, growing supply concerns

By Duygu Alhan

Oil prices rose on Monday over a weak US dollar, plus ongoing uncertainties over the timing of the US Federal Reserve's interest rate cut, and the Israel-Palestine and Russia-Ukraine conflicts.

International benchmark Brent crude traded at $85.66 per barrel at 10.35 a.m. local time (0735GMT), up 0.77% from the closing price of $85 per barrel in the previous trading session.

American benchmark West Texas Intermediate (WTI) traded at $82.22 per barrel, a 0.83% rise from the previous session that closed at $81.54 per barrel.

Oil markets started the week on an optimistic upswing due to the falling value of the US dollar against other currencies, which lost 0.33% to 105.52, underpinning the rise in prices by making oil trade cheaper for other currency holders.

Meanwhile, uncertainty over the timing of the Fed's first interest rate cut this year continues to weigh on prices.

While analysts' expectations that the bank will cut interest rates this year are gaining strength, experts are waiting for a Tuesday speech by Fed Chairman Jerome Powell and the Fed's June meeting minutes due out Wednesday for insight into the bank's future steps.

Low interest rates support a lower US dollar, making oil cheaper for holders of other currencies.

Moreover, escalating geopolitical tensions in the Middle East, home to the vast majority of global oil reserves, and Russia, one of the world's biggest producers, support upward price movements fueled by supply concerns.

Three Palestinians were killed in an Israeli airstrike on a residential apartment in Gaza City on Sunday evening, said local officials.

These attacks have triggered concerns that Yemen's Houthis will persist with their attacks on commercial ships in the Red Sea, one of the world's busiest maritime routes for oil and fuel shipments, in solidarity with Gaza Palestinians.

The group announced Friday that it attacked the Waler oil tanker with several drones in the Mediterranean Sea while it was headed to Haifa, Israel.

Russia also claimed on Sunday to have taken control of two villages in Ukraine's eastern Donetsk region. Given that Russian crude and refined products make up 7%-8% of the world's supply, the possibility of a decline in the country's oil exports raises supply concerns among market players.