Global oil prices fell on Monday, snapping a five-day rally as a strong U.S. dollar pressured the market ahead of crucial economic updates from the Federal Reserve and U.S. labor market data.
Price Movement
Brent crude futures dropped by 28 cents, or 0.4%, to $76.23 per barrel as of 0800 GMT, retreating from Friday’s high—the highest since October 14. Similarly, U.S. West Texas Intermediate (WTI) crude slipped by 27 cents, or 0.4%, to $73.69 per barrel, pulling back from its highest level since October 11.
The recent surge in oil prices was driven by expectations of increased demand due to colder weather in the Northern Hemisphere and fiscal stimulus measures from China aimed at revitalizing its slowing economy. However, the strengthening U.S. dollar tempered these gains, making oil more expensive for international buyers.
Market Sentiment and Investor Reaction
Priyanka Sachdeva, a senior market analyst at Phillip Nova, highlighted that the dollar’s strength remains a concern for investors. The U.S. dollar hovered near a two-year high, keeping markets cautious.
Investors are also awaiting key economic indicators this week, including the Federal Reserve’s latest meeting minutes on Wednesday and the December payroll report on Friday. These updates are expected to shed light on the Fed’s monetary policy direction and its impact on energy demand.
Saudi Aramco and Geopolitical Factors
Adding to market dynamics, Saudi Aramco recently announced its first crude price hike for Asian buyers in February after three months of price cuts, signaling confidence in regional demand recovery.
Meanwhile, geopolitical risks, including potential stricter sanctions on Iranian and Russian oil exports, could disrupt supply. Analysts predict that Iran’s crude output could drop by 300,000 barrels per day to 3.25 million barrels per day in the second quarter if additional sanctions are imposed.
Supply and OPEC’s Role
Despite these uncertainties, analysts warn of a potential supply surplus in 2025, with non-OPEC production—particularly from the U.S.—expected to grow. The U.S. oil rig count fell by one to 482 last week, according to Baker Hughes, but analysts remain cautious about potential increases in domestic production under favorable policies.
Patrick De Haan, Head of Petroleum Analysis at GasBuddy, noted that OPEC’s influence over global oil prices has weakened. “OPEC’s relevance has likely diminished as they continue to struggle against lower prices,” he said.
As the oil market navigates a complex mix of geopolitical, economic, and supply factors, the coming weeks will reveal whether stability can be maintained or if further volatility lies ahead.
