Oil prices continued their decline on Monday on signs of weak fuel demand and comments from U.S. Federal Reserve officials that dampened hopes of a rate cut that could slow growth and restrict energy use in the world’s largest economy.
Brent crude futures were down 7 cents, or 0.1%, at $82.72 a barrel as of 06:24 GMT, while WTI crude oil futures were down 5 cents at $78.21 a barrel.
Oil markets paid little attention to the impact of conflicts in the Middle East and turned their attention back to the world economic outlook.
The contraction of China’s producer price index (PPI) in April shows that commercial demand remains weak, and the latest US economic data also signaled a slowdown.
Both benchmarks closed nearly $1 lower on Friday, offsetting gains made early last week on concerns about supply disruptions from the Israel-Gaza conflict as Fed officials debate whether U.S. interest rates are high enough to bring inflation back to 2%.
Analysts expect the US central bank to support the dollar by keeping the policy rate at the current level for a longer period. A stronger dollar makes dollar-denominated oil more expensive for investors holding other currencies.
Oil prices also fell on signs of weak demand as US gasoline and distillate inventories increased in the week before the start of the US driving season, analysts said.
Refiners around the world are struggling with falling diesel profits as new refineries increase supply, mild weather conditions in the northern hemisphere and slow economic activity negatively impact demand.
Still, the market remained supported by expectations that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, could extend supply cuts into the second half of the year.
Iraq, OPEC’s second-largest producer, said it was committed to the voluntary oil production cuts agreed by OPEC and was willing to cooperate with member countries in efforts to achieve greater stability in global oil markets.
The comment followed his suggestion on Saturday that Iraq had made sufficient voluntary cuts and would not accept additional cuts proposed by the OPEC+ producer group at its meeting in early June.
Earlier this month, OPEC+ called on Iraq to increase its production quota by a total of 602,000 barrels per day in the first three months of 2024. The group said Baghdad agreed to compensate with additional production cuts for the rest of the year.
Eventually, Iraq has fallen short of making additional voluntary cuts since the beginning of the year, and Iraq’s willingness and ability to make further cuts is therefore likely limited. The noise is likely to increase ahead of the next Joint Ministerial Monitoring Committee (JMMC) meeting, scheduled for June 1.
The number of oil rigs in the US fell by three last week to 496, the lowest level since November, Baker Hughes said in its weekly report on Friday.
