Oil advances $5 a barrel, with weaker dollar and tight supply

Oil prices rose more than $5 on Monday, buoyed by a weaker dollar and expectations that the Federal Reserve will not raise interest rates by a full percentage point at its next meeting to fight inflation. .

September Brent crude futures rose $5.11, or 5.1%, to trade at $106.27 a barrel, after rising 2.1% on Friday.

U.S. WTI crude oil futures for August delivery rose $5.01, or 5.1%, to hit $102.60, after rising 1.9% in the previous session.

On Friday, two Federal Reserve officials indicated that the central bank will likely only raise interest rates by 75 basis points at its July 26-27 meeting.

Earlier reports that the Fed was considering a 100 basis point decision sent markets lower late last week.

“Today’s strong advance resulted in large part from a considerable and broad-based weakening of the dollar, which provided a key factor behind the daily swings in oil prices in recent weeks,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Both Brent and WTI last week saw their biggest weekly declines in about a month.

Oil supply remains tight. As expected, US President Joe Biden’s trip to Saudi Arabia did not yield any promises from the main OPEC producer to increase the supply of the commodity.

Gazprom, the Russian gas export monopoly, on Monday declared force majeure in supplying gas to at least one major European customer, according to a letter accessed by Reuters, potentially escalating the conflict between Moscow. and Europe.

This added support to oil prices as traders saw the episode as a precursor to Russia’s moves to weaponize its oil and gas exports.

“The other clear risk is that Russia will further reduce supplies to Europe to try to increase the cost of supporting Ukraine,” said Helima Croft, head of global commodities strategy at RBC Capital Markets.