By Peter Nurse
Investing.com — Oil prices slipped lower Monday, weighed by a stronger U.S. dollar and continued concerns that rising interest rates will stunt global economic growth.
By 09:40 ET (14:40 GMT), U.S. crude futures traded 1% lower at $75.53 a barrel, while the Brent contract fell 0.9% to $82.07 a barrel.
Crude oil futures have suffered a poor start to the week, pressured by the dollar trading near a seven-week peak on Monday after a number of strong U.S. economic data, including Friday’s core PCE index, strengthened the view that the Federal Reserve will have to raise interest rates further and keep them high for a prolonged period.
A firm dollar makes commodities, like oil, priced in the U.S. currency more expensive for foreign buyers.
“The latest inflation report from the U.S. has renewed concerns over higher interest rates by the Federal Reserve in the near term and overshadowed the supply outages from the Druzhba oil pipeline in Europe,” said analysts at ING, in a note.
Russia halted supplies of oil to Poland via the Druzhba pipeline, according to Polish refiner PKN Orlen, over the weekend.
Pipeline operator Transneft cited paperwork irregularities, although this move came shortly after Poland said it had delivered its first Leopard tanks to Ukraine.
“The pipeline has supplied around 400Mbbls/d of crude oil into Europe,” added ING. “However, the company said that end-users won’t be impacted by the halt in the immediate term as the Russian crude makes up only around 10% of the total supply; although longer disruptions to the transit route could have some impact.”
Reuters reported last week that Russia, the world’s third-largest crude producer, plans to cut up to 25% of oil exports from its western ports in March, which is more than the 500,000 barrel per day supply cut that Moscow had previously announced.
Any global crude shortage is unlikely to be filled by U.S. shale producers, as the latest data from Baker Hughes showed that the U.S. oil rig count declined for a second consecutive week, by seven to a total rig count of 600.
“The number of active rigs in the U.S. has been falling gradually since the start of the year. This is not a great signal for the market in terms of U.S. supply growth, particularly with the tighter supply outlook from Russia,” ING added.
Bank of America analysts cut their estimate for average U.S. crude prices this year to $88 a barrel from $100 in the face of a weakening U.S. and global economy.