As the prospects of top oil exporters coming to an agreement to reduce oil oversupply became less likely, oil price reacted by hitting its one-month low. Even as other commodities also lost ground, the U.S. dollar steadied after the strong U.S. jobs data was released on Friday.
The international bench mark, Brent crude LCOc1, dropped as much as $38.18, the lowest it hit since March 4, but it recovered to trade down 9 cents later on the day at $38.8.
Oil prices have dropped from a high of $100 per barrel in mid-2014 due to the supply glut, falling down to $27.10 in January. Brent hit $42.50 in March due to the possibility of oil producers agreeing to freeze production. But as it turned out, such move is now being shelved.
"Prices are coming down because of speculation Saudi Arabia will not join (the freeze deal) and that's probably what we'll see over the next three weeks - more speculation and more verbal intervention," said Hans van Cleef, ABN Amro chief energy economist.
Eric Rosengren, Boston Federal Reserve President stated that it was "surprising" that futures markets now predict that there will only be one or even no interest rate hikes this year. He said that prognosis could be "too pessimistic."
Rosengren was reacting to the fact that the dollar edged lower on Monday due to the conflicting outlooks for a hike in interest rates, even as oil prices remain under pressure on fears that oil producers will freeze their outputs to reduce global oil glut.
That momentarily got the dollar moving up to a session high of 94.829 against a group of major currencies. The dollar was previously down 0.09 percent at 94.535, the fifth time it dropped in six sessions.
Investors are also being forced to reconcile contradictory reports form officials of the U.S. Federal Reserve in the past weeks, when the central bank released its March 16 policy statement.