The price of oil rose by about 0.3% amid expectations of an increase in fuel demand this summer. However, the strengthening of the US currency prevented a further increase in oil prices.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.35% to 105.25, reaching its highest level since May 14. A stronger greenback makes dollar-denominated commodities such as oil more expensive for holders of other currencies. The dollar rally was triggered by strong data on the US labor market, presented on Friday, which reduced the likelihood of easing the Fed's monetary policy in the near future. Economists expect the Fed to maintain the status quo at this week's meeting, with investors now predicting only one 25 basis point rate cut this year. According to the CME FedWatch Tool, markets see a 8.9% probability of a 25 basis point rate cut at the Fed meeting in July, a 47.1% probability of a rate cut in September, and a 62.0% probability of monetary policy easing in November.
Last week, Brent and WTI crude oil showed a third weekly decline in a row on concerns that a plan to unwind production cuts by the OPEC+ from October will add to rising global supply. This announcement coincided with an increase in total commercial onshore oil and petroleum reserves in OECD countries to 48 million barrels in May, compared with an average increase of 30 million barrels during 2015-2019.
At the same time, analysts and traders expect that the demand for fuel in the summer period will lead to a reduction in inventories and support prices. Goldman Sachs analysts expect the price of Brent crude oil to rise to $86 per barrel in the third quarter.