The United States dollar rose to a three-week high on Monday, extending crude oil losses from Friday, while the U.S. rig count rose, despite nearly a quarter of Gulf of Mexico output remaining offline as a result of two hurricanes.
At the time of writing this, West Texas Intermediate (WTI) crude futures were trading near $72 a barrel, down 64 cents from Friday’s level.
On Friday, Brent crude futures fell by 0.6%, breaching $75 a barrel for the first time.
Following better-than-expected retail sales data in the U.S, oil fell and the greenback increased to a three-week high.
As a result, expectations grew that the Federal Reserve may begin to reduce its asset purchase program later in the year.
There may be some consolidation in WTI crude over the next few trading sessions, depending on how the dollar is trading.
Holders of currencies other than the dollar are adversely impacted by the strength of the dollar, making U.S. dollar-priced oil more expensive.
In addition, the number of U.S. oil rigs rose, keeping prices in check. On Friday, Baker Hughes reported that the number of oil and gas rigs rose by nine to 512 in the week ending Sept. 17, its highest level since April 2020 and double what it was at this time last year.
On Friday, 23% of Americans reported being unable to pay their bills. According to the Bureau of Safety and Environmental Enforcement, Gulf of Mexico crude production remained at 422,078 barrels per day.
As economies have recovered from the pandemic, oil prices have rebounded worldwide, especially natural gas, leading some analysts to predict a switch from oil to natural gas. In Asia, demand for diesel is expected to increase during winter, and power generation in the U.S. could increase.