A stronger U.S. dollar and rising coronavirus cases in China dampened expectations for a quick reopening of the economy in the largest crude importer in the world, respectively. Oil prices dipped on Monday.
After rising 1.1% on Friday, Brent oil futures were down 91 cents, or 1%, at $95.08 a barrel at 1301 GMT. WTI crude futures gained 2.9% on Friday before losing 95 cents, or 1.1%, to $88.01. According to Warren Patterson, director of commodities strategy at ING, U.S. dollar strength looks to be dragging on oil and the broader commodities complex this afternoon. According to the report, the market may have overreacted on Friday when China’s COVID quarantine regulations weren’t harsh.
Is There an End to China’s COVID Restrictions?
After China’s National Health Commission changed its COVID preventive and control measures to shorten quarantine durations for close contact with patients and inbound tourists on Friday, commodities prices increased. Over the weekend, there was an increase in 19 cases in China. On Monday, there were record infections in Beijing and other major cities.
In contrast, the Organization of the Petroleum Exporting Countries (OPEC) reduced its prediction for the rise of the world’s oil consumption this year and the next year, citing economic headwinds.US Treasury Secretary Janet Yellen said India could continue to buy Russian crude at higher prices, even from G7 countries, as long as it moved away from limited Western insurance, finance, and maritime services.
Dollar strength following remarks made by U.S. Fed Gov Christopher Waller, who stated on Sunday that the Fed could consider slowing the pace of rate increases at its next meeting, but that should not be seen as a softening in its commitment to lower inflation, also weighed on oil prices. Although there is still a way to go, and many parts of the world won’t be as fortunate, Craig Erlam, senior market analyst at OANDA, said that more signals of inflation topping would be good.