Historically, OPEC, led by Saudi Arabia had remained under the US pressure to move crude oil prices, the way the super power wanted. The recent history includes, Iran-Iraq war, imposition of sanctions on Iran and Venezuela, political turmoil in Nigeria and Libya and the latest being imposition of sanctions on Russia. Lately, there are growing evidences that the US power to maneuver crude oil prices is on the decline.
Oil prices tumbled about one percent on Monday as concerns about China's faltering economic recovery and a stronger dollar, after seven weeks of gains driven by tightening supply from OPEC Plus cuts.
Brent crude futures slipped 93 cents, or about 1.1% to US$86.46 a barrel by 1237 GMT, while US West Texas Intermediate (WTI) fell US$1.03, or roughly 1.2%, to US$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 US 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," she said.
China's sluggish economic recovery and a stronger US dollar could depress prices, but OPEC Plus has indicated it would do whatever it takes to tighten supply and stabilize markets, CMC Markets analyst Tina Teng said.
The US dollar index extended gains after a slightly bigger increase in US producer prices in July lifted Treasury yields despite expectations the Federal Reserve is at the end of hiking interest rates
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 Plus, 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".
Separately on Monday, a Shell spokesperson said exports of Nigeria's Forcados crude oil resumed on Sunday, roughly a month after loadings of the medium sweet grade were suspended because of a potential leak at the export terminal.
The suspension of Forcados loadings contributed to Nigeria becoming the second-biggest contributor to the drop in OPEC crude oil output in July.
