Oil prices decline in early trade

24 Jun 2024 , 10:13 AM

Oil prices declined in early Asian trading on Monday for the second consecutive session, pressured by a stronger dollar amid renewed concerns about higher interest rates and reduced investor risk appetite.

Brent crude futures dropped by 40 cents, or 0.5%, to $84.84 per barrel as of 0036 GMT, following a 0.6% decline on Friday. Similarly, U.S. West Texas Intermediate (WTI) crude futures fell by 39 cents, or 0.5%, to $80.34 per barrel.

Tony Sycamore, a markets analyst at IG in Sydney, noted, “The U.S. dollar has strengthened this morning, driven by improved U.S. PMI data on Friday and political uncertainties ahead of the French election.” A stronger dollar typically makes commodities priced in dollars less attractive to holders of other currencies.

Despite the recent decline, both benchmark crude contracts recorded gains of approximately 3% last week. This was supported by signs of increased demand for oil products in the U.S., the world’s largest consumer, and ongoing supply constraints maintained by OPEC+ production cuts.

ANZ analysts highlighted that U.S. crude inventories decreased, while gasoline demand continued to rise for the seventh consecutive week. Additionally, jet fuel consumption has returned to pre-pandemic 2019 levels.

Geopolitical tensions in the Middle East due to the Gaza crisis and increased drone attacks on Russian refineries from Ukraine have also provided support to oil prices.

Meanwhile, in Ecuador, Petroecuador declared force majeure on deliveries of Napo heavy crude for exports following the shutdown of a crucial pipeline and oil wells due to heavy rainfall, according to sources on Friday.

In the U.S., the number of operating oil rigs decreased by three to 485 last week, marking the lowest level since January 2022, as reported by Baker Hughes in its Friday report.