Oil prices fall as strengthening US dollar dampens demand

Oil prices dropped on Tuesday after extending losses of about 2% in the previous session, as a stronger US dollar and a surge in COVID-19 cases in China raised concerns about weakening global demand.

Brent crude futures were down 57 cents, or 0.6%, to $95.62 a barrel after sliding $1.73 the previous session.

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The price of West Texas Intermediate crude in the United States was $90.58 a barrel, down 55 cents, or 0.6%, from the previous session.

The US dollar climbed for the fourth consecutive session on Monday as investors waited for high inflation data this week, which might lead to the Federal Reserve maintaining its aggressive monetary policy. A strong dollar lowers the demand for oil by making it more costly for purchasers who use other currencies.

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Interest rate hikes by central banks have begun to weaken the economy, but the entire impact of the tighter policy will not be seen for months, according to Fed Vice Chair La el Brainard.

To limit losses, the Organization of Petroleum Exporting Countries and its allies, including Russia, agreed last week to reduce their output target by 2 million barrels per day, heightening fears about tighter oil supplies.

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EU sanctions on Russian crude and oil products will go into effect in December and February, respectively, while the EU last week finalised a fresh set of sanctions against Russia, including a price ceiling on Russian oil exports.

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Petroleum Minister Hardeep Singh Puri told Reuters that India has a “healthy dialogue” with Russia and will consider what is offered following the announced ownership reform of the Sakhalin-1 oil and gas project.

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Russia issued a decree on Friday authorising it to seize Exxon Mobil’s 30% stake and giving a Russian state-run company the ability to decide whether overseas shareholders, including India’s ONGC Videsh, may continue to participate in the project.