(LONDON) Crude prices lost some ground on Monday, as the strong dollar erased the geopolitical risk premium linked to growing tensions between Russia and Ukraine in the Black Sea.
Around 6:30 a.m. (Eastern Time) (12:30 p.m. Paris), a barrel of Brent North Sea oil, for delivery in October, lost 1.07% to $85.32.
Its US equivalent, a barrel of West Texas Intermediate (WTI), for September delivery, fell 1.12% to $81.89.
After hitting their highest price in nearly four months at the start of the session, the two crude oil benchmarks were down slightly, with the strengthening dollar weighing on prices.
Since black gold prices are denominated in greenbacks, an appreciation of the American currency discourages oil purchases, while a weaker dollar strengthens demand.
The strength of the U.S. currency has erased fears over supply due to rising tensions between Russia and Ukraine in the Black Sea.
On Saturday evening, Russian missiles struck buildings of Ukrainian aircraft manufacturer Motor Sich, a company “of strategic importance”, several hours after a Ukrainian drone attack on a Russian oil tanker in the Black Sea.
These attacks “increase geopolitical risk” due to “large export volumes of crude oil and petroleum products via the Black Sea”, DNB analysts say.
The number of attacks has increased on both sides since Moscow refused in mid-July to renew a UN-brokered agreement that allowed Ukrainian grain exports.
According to DNB analysts citing data from Rystad Energy, around 2.1 million barrels per day of oil and one million barrels per day of refined products are currently exported through the Black Sea.
If “significant volumes of crude oil and petroleum products are therefore exposed to increased geopolitical risk”, the supply is not interrupted for the moment, however, specify the analysts.
