Despite several bullish factors, oil prices erased earlier gains to drop on Monday morning due to a strengthening U.S. dollar.
As of 9:42 a.m. EST on Monday, WTI Crude was down 2.02% at $83.42, and Brent Crude traded below $87 a barrel, at $86.42, down 1.67%. Oil prices were up in early Asian trade but reversed course in the morning in the U.S. as the dollar rose to a two-week high, on the back of the heightened tension between Russia and the West over Ukraine. A stronger dollar makes oil buying more expensive for holders of other currencies.
The rising greenback thus reversed oil's earlier gains. Crude prices started Monday trade in Asia higher, amid heightened geopolitical tensions over Ukraine and in the Middle East.
Early on Monday, the United Arab Emirates (UAE) said it had intercepted two ballistic missiles that were targeting Abu Dhabi. This took place a week after the Iran-aligned Houthis attacked targets in the UAE with drones in attacks that killed three people.
"The Ministry of Defence announced on Monday that its air defence forces had intercepted and destroyed two ballistic missiles targeting the UAE, which were fired by the Houthi terrorist militia," state news agency WAM reported, adding that there were no casualties. In its statement, the ministry affirmed on Monday its "full readiness to deal with any threats," adding that it would "take all necessary measures to protect the UAE from any attacks."
Related: Russia's Oil Output Could Peak In 2023
The standoff over Ukraine is also giving the commodity markets jitters, but early on Monday, only natural gas among the energy commodities was rising due to the threat of a Russian invasion in Ukraine.
Risk-off Monday is spreading to commodities, except those where a conflict could trigger even tighter supply, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said on Monday.
Geopolitical factors aside, the oil market looks tighter than previously expected, with resilient demand and OPEC+ struggling to add as much production as its monthly quota allows.
"Supported by tight market conditions, Brent may attempt another push to the upside towards key technical and psychological resistance at $90 a barrel," Saxo Bank's Hansen said today.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More