Oil prices fell sharply on Monday, reaching their lowest level in three weeks, as a stronger U.S. dollar and worries about global demand weighed on the market. The decline came after a rally in the third quarter that saw oil prices rise nearly 30% to 10-month highs.
The U.S. dollar rose to a 10-month high against a basket of other currencies, making oil more expensive for holders of other currencies and reducing the appeal of commodities. The dollar was boosted by expectations that the U.S. Federal Reserve will keep interest rates higher for longer, which could slow economic growth and oil consumption.
The market also faced pressure from rising crude supplies and signs of weakening demand in some regions. Turkey said it would resume operations this week on a pipeline from Iraq that has been suspended for about six months, adding more oil to the market. Saudi Arabia, the world’s top oil exporter, could also ease its voluntary supply cut of 1 million barrels per day (bpd) in the coming months, according to some analysts.
Meanwhile, the outlook for oil demand was clouded by the resurgence of COVID-19 cases in some countries, especially China, the world’s largest oil importer. China has imposed lockdowns and travel restrictions in several provinces to contain the latest outbreak, which could dampen fuel consumption during the upcoming Golden Week holiday.
In addition, manufacturing data from Europe showed that the euro zone, Germany and Britain remained in a downturn in September, raising concerns about the impact of high energy prices and supply chain disruptions on economic activity.
Oil prices fell about 2% on Monday to a three-week low as a higher-priced Brent contract expired, the U.S. dollar strengthened and traders took profits1. On its first day as the front-month, Brent futures for December delivery fell to $90.84 a barrel by 1:26 p.m. EDT (1726 GMT), down $1.36, or 1.5%, from where it settled on Friday1. That was down about 5% from where the November future closed on Friday when it was still the front-month1. That was the Brent front-month’s biggest daily percentage decline since late May1. U.S. West Texas Intermediate (WTI) crude fell $1.57, or 1.7%, to $89.22 per barrel1. Both benchmarks were headed for their third daily decline and their lowest settlements since mid-September1.