Oil prices closed mixed on Monday, with investors questioning whether supplies would be pressured by the sharp rise in energy costs recently, the strength of the dollar, and increasing COVID-19 cases. Brent crude, the global benchmark, finished the trading session down by 12 cents, or 0.2 percent, settling at $82.05 per barrel, while U.S. West Texas Intermediate rose by 8 cents, or 0.1 percent, closing at $80.88.
Oil prices were influenced by the U.S. dollar reaching a 16-month high against a basket of currencies, causing concerns among investors regarding the global economy. A stronger dollar makes dollar-denominated commodities, such as oil, more expensive for buyers using other currencies.
Last week, U.S. energy companies added oil and natural gas rigs for the third consecutive week, encouraged by a 65 percent increase in U.S. crude prices since the beginning of the year. U.S. shale oil production is expected to reach pre-pandemic levels of 8.68 million barrels per day in December, according to Rystad Energy. On the other hand, indicators suggest that demand may slow due to rising COVID-19 infections and inflation.
The Organization of the Petroleum Exporting Countries (OPEC) cut its global oil demand forecast for the fourth quarter by 330,000 barrels per day from its estimates last month, as high energy prices hinder economic recovery from the COVID-19 pandemic. Louise Dickson, senior oil market analyst at Rystad, stated, "The market now seems less concerned about the current supply shortfall, as it expects that to be short-term." She added, "Traders are refocusing on factors that could drive the market lower... the likelihood of additional oil supply sources and more COVID-19 infections."
Emirati Energy Minister Suhail Al Mazrouei mentioned that all indicators point to an oil supply surplus in the first quarter of 2022.
