By Shariq Khan
NEW YORK (Reuters) -Oil prices were little changed on Monday, with a stronger dollar weighing on demand while tensions in the Middle East kept traders cautious of potential supply disruptions.
Brent crude futures were trading flat at $77.34 a barrel by 11:50 a.m. ET (1650 GMT) and U.S. West Texas Intermediate crude futures fell 13 cents, or 0.2%, to $72.15 a barrel.
Both benchmarks ended last week down about 7% after stronger-than-expected U.S. jobs data suggested interest rate cuts could be further out than expected.
On Monday, fresh data showed U.S. services sector growth picked up in January, dampening hopes of rate cuts even more and pushing the U.S. dollar to its highest in almost three months against other major currencies.
A stronger greenback lowers demand for dollar-denominated oil from investors holding other currencies.
Meanwhile progress on ceasefire negotiations between Israel and Hamas appeared elusive, indicating tensions in the oil-producing region are set to linger.
Investors remained wary of any escalation in the Middle East conflict, after the U.S. signalled further strikes on Iran-backed groups in the Middle East in response to a deadly attack on U.S. troops in Jordan.
“Oil is caught in a range driven by opposing forces,” UBS analyst Giovanni Staunovo said.
The U.S. also continued its campaign against Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes, although supply has been largely unaffected.
“Oil markets will likely respond by continuing to discount supply disruption risks in the Middle East,” said Commonwealth Bank commodities analyst Vivek Dhar in a note, adding that would likely keep Brent futures below $80 a barrel.
In Russia, two Ukrainian attack drones struck the largest oil refinery in the country’s south on Saturday, a source in Kyiv told Reuters, the latest in a series of long-range attacks on Russian oil facilities which has reduced Russia’s exports of naphtha, a petrochemical feedstock.
Lukoil, which owns the 300,000 bpd Volgograd refinery, later said the plant was working as normal.
(Reporting by Noah Browning, Florence Tan and Colleen Howe in Beijing; Editing by Chizu Nomiyama, David Evans and Ros Russell)
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