Oil futures rose on Monday, defying a rising dollar, driven by geopolitical tensions and a strong US economy.
This shift overshadowed expectations of a cautious Federal Reserve (Fed) on monetary easing.
West Texas Intermediate (WTI) for March delivery on the New York Mercantile Exchange (Nymex) increased by 0.69% to $72.78 a barrel.
Brent crude for April on the Intercontinental Exchange (ICE) grew by 0.85% to $77.99 a barrel.
Fed Chair Jerome Powell’s recent comments hinted at three rate cuts this year, moving away from a March reduction. This led to a cautious market mood, boosting the dollar.
The dollar’s gain, following resilient US service sector PMI readings, initially weighed on commodities.
However, oil rebounded by early afternoon.
The US economy’s strength suggests positive demand prospects, while Red Sea tensions hint at supply threats.
Over the weekend, US and UK-led forces targeted Houthis in Yemen, affecting supply dynamics.
Fitch notes that geopolitical factors will influence oil prices this year.
Yet, it warns that a global economic slowdown, especially with China’s GDP growth forecast below 5%, will eventually dampen the commodities rally.
In 2024, a global material demand slowdown, including oil, copper, and aluminum, links to broader economic and geopolitical trends, highlighting market interconnectedness.