Oil prices gained over 4.6% on Monday as the market attempted to digest developments in the Middle East, and as the dollar weakened slightly.
Brent oil prices climbed to $105.8 per barrel by 3:42 EST Monday, up 4.65% on the day. West Texas Intermediate (WTI) was trading at just over $102.
Prices rose Monday as traders assessed the Saudi sentiment following U.S. President Joe Biden’s meeting with the Crown Prince on Friday.
On Sunday, Biden’s advisor on international energy affairs, Amos Hochstein, said Washington believed OPEC’s producers in the Middle East–namely Saudi Arabia and the UAE–would take some steps to boost supply to the oil market soon.
However, the overriding sentiment seems to be that the Saudis have no intention of intervening in oil prices at this time. Last week’s sell-off based on notions that Biden’s trip to Saudi Arabia might result in an OPEC decision to increase production is now being reversed.
Monday’s higher oil prices are also being driven by a weakening U.S. dollar thanks to investors who have softened their expectations of a more aggressive approach to interest rates by the Fed next week.
The U.S. dollar index fell 0.464% on Monday.
Biden’s meeting with the Saudi Crown Prince had markets hedging oil lower, despite widespread doubts that anything would be accomplished in terms of increasing OPEC output.
On Monday, Iraq’s oil minister told Bloomberg that oil is likely to continue trading above $100 for the remainder of this year.
“I would like OPEC to retain its tools to measure and control output and maintain the existing balance,” Iraqi Oil Minister Ihsan Abdul Jabbar told Bloomberg. “We will discuss that with our partners.”
The next meeting for OPEC+ will be on August 3rd.
NB: Charles Kennedy wrote this article for Oilprice.com