Oil fell more than 1.5% on Monday, weighed down by expectations of weaker global demand and US dollar strength ahead of possible large interest rate increases, though supply concerns limited the decline.
Central banks around the world are almost certain to raise borrowing costs this week, with the US Federal Reserve potentially raising rates by a full percentage point.
“The upcoming Fed meeting and the strong dollar are keeping a lid on prices,” said Tamas Varga of oil broker PVM.
By 1002 GMT, Brent crude for November delivery had fallen $1.49, or 1.6 percent, to $89.86 per barrel. In October, US West Texas Intermediate (WTI) fell $1.57, or 1.8 percent, to $83.54.
Oil was also pressured by hopes that Europe’s gas supply crisis would be alleviated. German buyers reserved capacity to receive Russian gas through the now-closed Nord Stream 1 pipeline, but this was later revised and no gas has flowed.
Crude prices have skyrocketed this year, with the Brent benchmark approaching its all-time high of $147 in March after Russia’s invasion of Ukraine exacerbated supply concerns.
The US dollar remained near a two-decade high ahead of the Fed’s and other central banks’ decisions this week. A stronger dollar raises the price of dollar-denominated commodities for holders of other currencies, putting pressure on oil and other risk assets.
Forecasts of weaker demand, such as the International Energy Agency’s prediction last week of zero demand growth in the fourth quarter, have also weighed on the market. Despite those concerns about demand, supply concerns kept the decline in check.
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