Oil prices fall amid pressure from strong dollar

June 23, 2024 06:54 PM PDT | By Investing

Oil prices fall amid pressure from strong dollar

Strong dollar weighs on oil amid inflation watch

The dollar index rose 0.1% on Monday, extending gains from the prior week as traders priced out bets on early interest rate cuts by the Fed. The greenback was close to a two-month high against a basket of currencies.

Strength in the dollar weighs on the prices of commodities that are priced in the greenback. A stronger dollar also dents international oil demand by making crude more expensive for foreign buyers. The dollar was also supported by stronger-than-expected purchasing managers index data released on Friday.

Focus this week was squarely on key PCE price index data, which is the Federal Reserve’s preferred inflation gauge. The reading is due this Friday and is expected to show inflation remaining well above the Fed’s 2% annual target, giving the central bank more headroom to keep rates high.

Oil prices mark two weeks of gains

Oil prices were sitting on two weeks of strong gains, driven by a mix of encouraging demand signals and as worsening geopolitical conditions saw traders begin pricing in a risk premium.

U.S. data showing unexpected draws in oil inventories and improved gasoline demand factored into a more positive outlook for crude.

Growing risk of an all-out war between Israel and Hezbollah, as an extension of the conflict with Hamas, factored into expectations of supply disruptions in the Middle East.

Continued clashes between Russia and Ukraine, with Kyiv targeting major Russian refineries, also spurred concerns over supply disruptions.

This article first appeared in Investing.com

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