Oil prices slightly declined on Monday over weak oil demand concerns arising from fears of a global economic recession coupled with the rising dollar value, deterring investors from trading in more expensive US dollar-indexed oil.
International benchmark Brent crude traded at $91.30 per barrel at 09.26 a.m. local time (0626 GMT) for a 0.05% decrease from the closing price of $91.35 a barrel in the previous trading session.
American benchmark West Texas Intermediate (WTI) traded at $84.19 per barrel at the same time for a 0.67% loss after the previous session closed at $84.76 a barrel.
Although market reports from OPEC and the International Energy Agency (EIA) estimate growth in global oil demand both this year and next year, with demand outpacing pre-COVID levels in 2023, demand curbs from concerns of a global economic recession are weighing on prices.
OPEC said gas-to-oil substitution for power generation and industrial consumption in OECD Europe and Asia represents an important component of the demand outlook for the year.
The EIA similarly predicted a rise in demand, but warned about the faltering Chinese economy and an ongoing slowdown in OECD economies.
Meanwhile, Chinese authorities said on Sunday that Covid restrictions in the southwestern Chinese city of Chengdu would lift on Monday.
“The market still has the start of European sanctions on Russian oil hanging over it. As supply is disrupted in early December, the market is unlikely to see any quick response from US producers,” Australia and New Zealand Banking Group (ANZ) Commodity Strategist Daniel Hynes said in an emailed note.
Hynes added that growth is cobbled by “rising costs, tight labor markets and shareholders who are still demanding profits are returned to them.”
Oil prices indexed to the US dollar came under pressure from the rising value of the greenback.
The US dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc, rose 0.22% to 109.75.