Oil up following weak US dollar, growing supply concerns

Oil prices increased on Monday over a weak US dollar, ongoing uncertainties over the timing of the US Federal Reserve’s (Fed) interest rate cut, conflicts between Israel and Palestine and the Russia-Ukraine war.

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

The American benchmark West Texas Intermediate (WTI) traded at $82.22 per barrel at the same time, 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 decreasing value of the US dollar against other currencies, which fell by 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 for this year continues to influence prices.

While analysts’ expectations that the bank will cut interest rates this year are gaining strength, experts are waiting for Fed Chairman Jerome Powell’s speech on July 2 and the Fed’s June meeting minutes due on July 3 to get 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 a vast majority of global oil reserves, and Russia, one of the world’s biggest producers, support upward price movements fueled by supply concerns.

According to a statement made by the Civil Defense Agency, three Palestinians were killed in an Israeli airstrike on a residential apartment in Gaza City on Sunday evening.

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 Palestinians in Gaza.

The group announced Friday that it attacked the Waler oil tanker with several drones in the Mediterranean Sea while it was headed to the Haifa port in Israel. The group’s military spokesman, Yahya Saree, also noted that the attack was carried out in cooperation with the Iraqi Islamic Resistance group in Iraq.

Furthermore, Russia claimed on Sunday to have taken control of two villages in Ukraine’s eastern Donetsk region. Given that Russian crude and refined products comprise 7% to 8% of the world’s supply, the possibility of a decline in the country’s oil exports increases supply concerns among market players. ​​​​​​​

• American Benchmark West Texas Intermediate (WTI)