Oil prices hesitated on Monday, before closing lower, both weighed down by a strong dollar which weighs on crude purchases, but also contained by geopolitical news. The price of a barrel of Brent from the North Sea, for delivery in February, lost 0.43% to $72.63. Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery the same month, dropped 0.32% to $69.24. “We saw a lot of volatility today (…) and the market seems to be caught in headwinds”commented to AFP Phil Flynn, of Price Futures Group.
On the one hand, black gold prices were weighed down by a dollar which regained strength at the start of the week, supported in particular by high bond rates under the effect of the tightening of the American central bank (Fed). As oil is exchanged in dollars, the appreciation of the greenback penalizes buyers with foreign currencies, by raising the price of a barrel for them. “On the other hand, geopolitical risk factors are causing growing concern”which limits the downward movement, according to Mr. Flynn.
“Maximum pressures”
The market reacts in particular to “regular comments from various leaders around the world on the possibility of restricting Russia's exports”recalled John Kilduff, analyst at Again Capital. “The same goes for Iran.” The market expects that “the new administration” of US President-elect Donald Trump, adds “a new series of maximum pressures”added the analyst. In addition, Donald Trump attacked rights of way on Saturday, according to him «ridicules»which American ships using the Panama Canal are subject to and threatened to demand the resumption of control of this navigation route by the United States.
“As ships continue to avoid the Red Sea” due to attacks by Houthi rebels, “Another key route disrupted risks adding to supply chain chaos, which could hurt growth and energy demand, but also disrupt oil supplies”pointed out Susannah Streeter, of Hargreaves Lansdown. According to estimates, some 5% of global maritime traffic passes through the Panama Canal, which allows ships traveling in particular between Asia and the east coast of the United States to avoid a long and perilous detour through the southern extremity of South America. Panamanian President José Raúl Mulino rejected this threat from Mr. Trump on Sunday, assuring that “the canal is not controlled, directly or indirectly, by China, the European Community, the United States, or any other power”.