(Bloomberg) — Oil in London fell as risk-off sentiment across financial markets weighed on prices.
Brent crude lost 1.4%, erasing earlier gains. Equities in Europe declined on Monday amid concerns over the U.S. Federal Reserve’s imminent rate liftoff, while the dollar climbed, making commodities priced in the currency less attractive.
Crude recently has been buoyed by robust demand in the face of the omicron variant. Saudi Aramco said Monday that consumption is nearing pre-Covid levels. That is now being compounded by heightened political risk as Russia amasses troops near Ukraine, and the United Arab Emirates comes under attack from Yemen’s Houthi rebels.
“Oil prices are under pressure to start the week dragged down by negative risk sentiment overall in commodity markets,” said Jens Pedersen, a senior analyst at Danske Bank A/S. “The dollar is on the rise ahead of Wednesday’s FOMC meeting, and that seems to be the main culprit.”
Despite the strength in crude, there are some signs that the recent rally could be growing increasingly stretched. Money managers hold more than 12 bullish bets for every bearish one in WTI, the most since November. Crude has also recently been on a run of being technically overbought.
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