Supply Surplus, Strong Dollar Weaken Oil Prices

During the session, Brent crude futures shed 31 cents or 0.43 per cent to sell at $72.63 a barrel as the US West Texas Intermediate (WTI) crude futures fell by 22 cents or 0.32 per cent to $69.24 a barrel.

Concerns about European supply eased on reports the Druzhba pipeline, which sends Russian and Kazakh oil to Hungary, Slovakia, the Czech Republic and Germany, has restarted after halting on Thursday due to technical problems at a Russian pumping station.

The pipeline, which is one of the world’s largest, capable of carrying 2 million barrels per day is the last artery connecting Russian oilfields with European refineries after European Union governments curbed their reliance on Russian gas in 2022.

Pressure also came as the US dollar hovered around two-year highs on Monday morning. A stronger Dollar makes oil more expensive for holders of other currencies.

The Dollar index, which measures the US currency against six of its largest peers, resumed its upward trajectory.

It suffered its biggest one-day drop in nearly a month on Friday following a softer-than-expected reading on inflation that was still above the Federal Reserve’s 2 per cent target rate.

Last week, the US Central Bank projected a more measured pace of rate cuts than markets had anticipated, pushing the greenback higher.

On Friday, US data that showed cooling inflation helped alleviate concerns after the Federal Reserve interest rate cut last week.

Worries about China also remain as Asia’s top refiner Sinopec forecast that China’s oil consumption will peak in 2027, weighing on prices.

On Friday, US President-elect Donald Trump urged the European Union to increase US oil and gas imports or face tariffs on the bloc’s exports.

He also threatened to reassert US control over the Panama Canal on Sunday, the route is very important for oil supply.

He accused Panama of charging excessive rates to use the Central American passage and this created a sharp rebuke from Panamanian President Jose Raul Mulino.

Market analysts note that a second Trump presidency, scheduled to start on January 20, will impact oil policies.