Oil prices fell on Monday, hit by a stronger dollar and investor concerns over the possibility of quicker than expected increases to interest rates by the U.S. Federal Reserve. Brent crude fell $1.42, or 1.6%, to $86.47 a barrel by 1430 GMT. U.S. West Texas Intermediate (WTI) crude dropped $1.70, or 2%, to $83.44, Reuters reports.

Brentspot prices and calendar spreads show traders expect inventories to become very tight over the next few months as consumption continues to outstrip production and erodes the already-low level of stocks around the world. The six-month spread is now in the 98th percentile for all trading days since 1990, consistent with downward pressure on inventories and upward pressure on prices. 

Short-term scarcity has pushed prices for crude delivered in March to around $5.50 per barrel higher than for deliveries deferred until September. Hedge fund managers have anticipated, accelerated and amplified the expected shortage of oil and resulting rise in prices by building large a bullish long position, John Kemp (Reuters) said. 

Barclays, meanwhile, has raised its average oil price forecasts by $5 a barrel for this year, citing shrinking spare capacity and elevated geopolitical risks. The bank raised its 2022 average price forecasts to $85 and $82 a barrel for Brent and WTI respectively. Both benchmarks rose for a fifth week in a row last week, gaining about 2% to reach their highest since October 2014. Oil prices are up more than 10% this year on the concerns over tightening supplies and OPEC+ now struggling to hit a targeted monthly output increase of 400,000 barrels per day, CNBC reports.

Early on Monday, the United Arab Emirates said it had intercepted two ballistic missiles that were targeting Abu Dhabi. This took place a week after the Iran-aligned Houthis attacked targets in the UAE with drones in attacks that killed three people. “The Ministry of Defence announced on Monday that its air defence forces had intercepted and destroyed two ballistic missiles targeting the UAE, which were fired by the Houthi terrorist militia,” state news agency WAM reported, adding that there were no casualties. In its statement, the ministry affirmed on Monday its “full readiness to deal with any threats,” adding that it would “take all necessary measures to protect the UAE from any attacks,” OilPrice reported.