NEW YORK: Brent crude oil prices were little changed on Monday, with lingering supply concerns from tensions in the Middle East offset by signs of weakening demand.
Oil markets’ were also seeing thinner volumes than usual due to the Presidents’ Day holiday in the US, UBS analyst Giovanni Staunovo noted.
Brent futures ticked 6 cents lower to $83.41 a barrel by 11:52 a.m. ET [1652 GMT]. US West Texas Intermediate (WTI) crude for March delivery, which expires on Tuesday, rose 36 cents, or 0.5%, to $79.55 a barrel. The WTI contract for April deliveries fell 10 cents to $78.36 a barrel.
Both Brent and WTI futures last week gained about 1.5% and 3% respectively, reflecting increasing risk of Middle East conflict widening. Capping those gains were slowing demand forecasts from the International Energy Agency and a bigger than expected increase to US producer prices in January, amplifying inflation concerns and lifting the dollar.
The dollar index, which tracks the currency against six peers, has gained for five straight weeks and edged slightly higher on Monday. A stronger greenback makes dollar-denominated oil less attractive to investors holding other currencies, denting demand.
“Oil has been quite choppy in recent weeks, partly because of the dollar strength,” said Fawad Razaqzada, market analyst at City Index. “The impact of the dollar has been offsetting supportive measures such as the Middle East situation, OPEC’s ongoing intervention and hopes economic conditions in China will improve in the coming quarters,” Razaqzada said.
Demand jitters were magnified on Friday when US Federal Reserve policymakers signalled the need for “patience” over expectations of cuts to interest rates.
Markets are also awaiting indications of the direction of demand from China after it returns from a week-long Lunar New Year holiday. The conflict in the Middle East continued over the weekend as Israeli raids put the Gaza Strip’s second-largest hospital out of service. On Saturday Yemen’s Iran-aligned Houthi fighters claimed responsibility for an attack on an India-bound oil tanker.