Global oil prices declined on Monday, ending a five-session rally, as a robust U.S. dollar exerted downward pressure on the market. The drop comes ahead of critical economic updates from the Federal Reserve and the U.S. labor market, Reuters reports.

Market Movements

Brent crude futures fell by 28 cents, or 0.4%, to $76.23 per barrel as of 0800 GMT, retreating from Friday’s close at its highest level since October 14. Similarly, U.S. West Texas Intermediate (WTI) crude declined by 27 cents, or 0.4%, to $73.69 per barrel, pulling back after reaching its highest point since October 11.

The recent rally in oil prices had been driven by optimism over increased demand, fueled by colder weather in the Northern Hemisphere and fiscal stimulus measures in China aimed at reviving its struggling economy. However, the strengthening U.S. dollar tempered these gains, making oil—a dollar-denominated commodity—more expensive for international buyers.

Dollar Strength Weighs on Oil Prices

“The strength of the dollar remains a key concern for investors,” noted Priyanka Sachdeva, a senior market analyst at Phillip Nova. The dollar hovered near a two-year high, maintaining caution across the markets.

Investors Await Key Economic Indicators

Market participants are closely monitoring pivotal economic indicators expected later this week. These include the minutes of the Federal Reserve’s latest meeting, set for release on Wednesday, and the December payroll report, due on Friday. Both updates are anticipated to provide valuable insights into the Fed’s monetary policy direction and its implications for energy consumption.

Saudi Aramco Signals Confidence in Asian Demand

Adding complexity to the global oil market, Saudi Aramco announced its first crude price hike for Asian buyers in February after three consecutive months of reductions. This move reflects confidence in a regional demand recovery despite broader global uncertainties.

Geopolitical and Supply Factors

Geopolitical concerns are also shaping market sentiment. Potential stricter sanctions on Iranian and Russian oil exports could impact supply flows. Analysts estimate that Iran’s crude production might drop by 300,000 barrels per day to 3.25 million barrels per day in the second quarter if additional sanctions are imposed.

Meanwhile, U.S. domestic production presents mixed signals. Baker Hughes reported on Friday that the U.S. oil rig count—a forward-looking indicator of output—fell by one to 482 last week. Despite this, market watchers remain cautious about potential production increases under policies favoring expansion in the sector.

OPEC’s Diminished Influence

Despite the current developments, a broader supply surplus looms over the oil market in 2025. Analysts anticipate that increases in non-OPEC supplies, including potential growth in U.S. production, could offset global demand growth.

“OPEC’s relevance likely has been reduced. They are continuously fighting lower prices,” remarked Patrick De Haan, Head of Petroleum Analysis at GasBuddy. This shift highlights a diminishing market-shaping power for OPEC as global dynamics evolve.

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