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Brent crude futures slipped 35 cents to $86.46 a barrel by 1027
GMT while U.S. West Texas Intermediate crude edged lower by 38
cents to $82.81 a barrel.
"Crude has been in overbought territory for some time now,
defying expectations of a correction. It has been singularly
focused on U.S. economic optimism, to the exclusion of the
increasingly stronger headwinds blowing in the eurozone and
China," said Vandana Hari, founder of oil market analysis
provider Vanda Insights.
"A rebalancing is overdue but it may need a reality check in the
markets stateside," Hari said.
Oil may be range-bound this week as China's sluggish economic
recovery and a stronger U.S. dollar could depress prices, but
OPEC+ has indicated it would do whatever it takes to tighten
supply and stabilise markets, CMC Markets analyst Tina Teng
said.
Earlier in the session prices dipped about 1% as the U.S. dollar
index extended gains after a slightly bigger increase in U.S.
producer prices in July lifted Treasury yields despite
expectations the Federal Reserve is at the end of hiking
interest rates. [FRX/]
A stronger dollar pressures oil demand by making the commodity
more expensive for buyers holding other currencies.
Meanwhile, supply cuts by Saudi Arabia and Russia, part of the
alliance between the Organization of the Petroleum Exporting
Countries and their allies, or OPEC+, are expected to erode oil
inventories over the rest of this year, potentially driving
prices even higher, the International Energy Agency said in its
monthly report on Friday.
Last week’s encouraging demand estimates, falling OPEC supply,
declining inventories and mitigated inflationary pressure, said
Tamas Varga of oil broker PVM, "is a warning signal that unless
China joins the party the path upwards will be paved with
pitfalls".
(Reporting by Natalie Grover in London; Additional reporting by
Florence Tan in Singapore and Mohi Narayan in New Delhi; editing
by Sonali Paul and Jason Neely)
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