Oil Prices Inch Up as Demand Hopes To Counteract Strong Dollar

Oil prices experienced a slight uptick on Monday as traders balanced the optimistic outlook for summer demand and geopolitical tensions with the impact of a stronger U.S. dollar.

This delicate equilibrium highlights the complexities of the global oil market, influenced by both supply and demand factors as well as currency fluctuations.

Market Overview

Current Price Trends

Brent crude futures rose by 15 cents, or 0.2%, reaching $85.39 a barrel by 0850 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude futures increased by 13 cents, or 0.2%, settling at $80.86 a barrel.

Both benchmarks posted gains of approximately 3% last week, marking their second consecutive week of upward movement.

Seasonal Demand Expectations

One of the primary drivers behind the recent price firmness is the anticipated surge in demand during the summer months in the northern hemisphere.

Tamas Varga, an analyst at oil brokerage PVM, highlighted the growing confidence that global oil inventories would significantly decline due to seasonal demand for oil products.

This expectation is bolstered by increased travel and industrial activities typically observed during the summer.

Geopolitical Factors

Middle East Tensions and Ukrainian Conflict

Geopolitical risks continue to play a crucial role in supporting oil prices. Tensions in the Middle East and the escalation of Ukrainian drone attacks on Russian refineries are significant factors.

Additionally, the European Union’s new sanctions package against Russia, which includes a ban on reloading Russian liquefied natural gas (LNG) in the EU for shipment to third countries, adds to the geopolitical complexities affecting the oil market.

Currency Impact

Stronger U.S. Dollar

A stronger U.S. dollar has created a counterbalance to the factors supporting oil prices.

The dollar’s strength makes dollar-denominated commodities like oil less attractive to holders of other currencies.

Tony Sycamore, an analyst at IG, noted that the U.S. dollar’s rise was influenced by better-than-expected U.S. PMI data and political concerns ahead of the French election.

The dollar index, which measures the performance of the dollar against six major currencies, climbed on Friday and continued its upward trend on Monday.

Regional Developments

Ecuador’s Force Majeure Declaration

In Ecuador, state oil company Petroecuador declared force majeure on Napo heavy crude deliveries for export.

This decision followed the shutdown of a critical pipeline and several oil wells due to heavy rain.

Such disruptions highlight the vulnerability of oil supply chains to natural events, which can have a ripple effect on global oil prices.

U.S. Oil Rig Count

In the United States, the number of operating oil rigs fell by three to 485 last week, the lowest level since January 2022, according to a report by Baker Hughes.

The decline in active rigs may signal a potential slowdown in U.S. oil production, further tightening supply and potentially supporting higher prices.


Oil prices have inched up as the market weighs the prospects of strong summer demand and geopolitical tensions against the headwinds of a strengthening U.S. dollar.

The complex interplay of these factors continues to shape the global oil market, with traders and analysts closely monitoring developments.

As the summer progresses and geopolitical situations evolve, the oil market is likely to experience continued volatility.

Understanding these dynamics is crucial for stakeholders in the oil industry and for those who follow global economic trends.

The ongoing balance between supply constraints, demand expectations, and currency fluctuations will remain a key focus in the coming months.

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