Oil prices fell as attention turned to the demand outlook in the United States, the world’s biggest oil user after reports of higher producer prices raised concerns that sticky inflation and potentially higher interest rates would limit fuel consumption growth.
Brent crude futures were down 61 cents, or 0.7%, at $82.86 a barrel at 04:40 GMT. WTI crude oil futures for the March contract expiring Tuesday were down 41 cents, or 0.5%, at $78.78 a barrel.
The WTI April contract was down 0.8%, or 60 cents, at $77.86.
Both Brent and WTI contracts rose on Friday as geopolitical tensions in the Middle East offset the International Energy Agency’s (IEA) forecasts of slowing demand.
WTI and Brent eased Monday morning as investors revived demand-side fears following a significant rise in US producer price index figures.
Producer prices in the US increased more than expected in January due to strong increases in service costs, raising inflation concerns.
Markets are also yet to see the direction of demand from China after China returns from its week-long Lunar New Year holiday; Presidents’ Day in the US will keep trade relatively quiet.
Meanwhile, Fed policymakers signaled “patience” on interest rate cuts on Friday. Higher rates increase the cost of purchasing oil, making the market bearish.
Tensions in the Middle East continued over the weekend, with Israeli raids knocking out the Gaza Strip’s second-largest hospital and the Houthis claiming responsibility for an attack on an oil tanker bound for India.
The Organization of the Petroleum Exporting Countries (OPEC) is well-positioned to absorb disruptions at most levels as spare capacity stands at an eight-year high of 6.4 million barrels of oil daily.
The International Energy Agency (IEA) predicts a yearly market surplus. While growth is expected to lose its strength in 2024, uncertainty in demand continues.
The United Nations Security Council is likely to vote on Tuesday on Algeria’s pressure on the 15-member body to demand an immediate humanitarian ceasefire in the Israel-Hamas conflict, which the United States has signaled to veto.
Russia said on Sunday it had taken full control of the Ukrainian town of Avdiivka, marking its biggest gain in nine months, days before the second anniversary of its operation.
It is not yet clear whether the death of Putin’s best-known rival, Alexei Navalny, in a penal colony in Russia’s Arctic on Friday will trigger new sanctions against Moscow, the world’s second-largest oil exporter.
