Oil prices slipped to a one-week low on Monday on expectations supplies will increase while demand will be pressured by the recent surge in energy costs, the strong dollar and rising COVID-19 cases.
Brent futures fell 76 cents, or 0.9%, to $81.41 a barrel by 1:13 p.m. EST (1813 GMT), while U.S. West Texas Intermediate (WTI) crude fell 70 cents, or 0.9%, to $80.09.
That puts both benchmarks on track to fall to their lowest close since Nov. 4.
The strong dollar weighed on oil prices, along with ongoing speculation that President Joe Biden’s administration will release oil from the U.S. Strategic Petroleum Reserve.
The safe-haven U.S. dollar hit a 16-month high against a basket of major peers as investors worried about the global economy. A stronger dollar makes oil more expensive for buyers using other currencies.
Last week, U.S. energy firms added oil and natural gas rigs for a third week in a row, encouraged by a 65% increase in U.S. crude prices so far this year.
U.S. shale production in December is expected to reach prepandemic levels of 8.68 million barrels a day, according to Rystad Energy. Meanwhile there are indications demand may be slowing due to heightened coronavirus cases and inflation.
The Organization of the Petroleum Exporting Countries (OPEC) last week cut its world oil demand forecast for the fourth quarter by 330,000 bpd from last month’s forecast, as high energy prices hampered economic recovery from the COVID-19 pandemic.
“The market now seems to be less concerned about the current supply tightness, expecting it to be short-lived,” Rystad senior markets analyst Louise Dickson said. “Traders are instead refocusing on the return of two bearish factors – the possibility of more oil supply sources and more COVID-19 cases.”
UAE Energy Minister Suhail al-Mazrouei said all indications point to an oil supply surplus in the first quarter of 2022.
“There’s little chance of OPEC+ raising output faster, especially if … the group expects the market to return to surplus in the first quarter of 2022,” said Craig Erlam, senior markets analyst at OANDA.
Europe has again become the epicentre of the COVID-19 pandemic, prompting some governments to consider re-imposing lockdowns, while China is battling the spread of its biggest outbreak caused by the Delta variant.
Royal Dutch Shell PLC said it would scrap its dual share structure and move its head office to Britain from the Netherlands.
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