Oil prices in early Asian trading on Monday experienced a decline, undoing the gains seen on Friday, as U.S. inflation data dashed hopes of imminent interest rate cuts, bolstering the dollar and dampening oil demand.
Brent crude futures dropped by 75 cents, or 0.84%, to $88.75 a barrel, while West Texas Intermediate (WTI) futures fell by 65 cents, or 0.78%, to $83.20 a barrel by 1221 GMT.
Tina Teng, an independent market analyst, highlighted that "sticky U.S. inflation" raised concerns about prolonged higher interest rates, leading to a stronger dollar and downward pressure on commodity prices.
Friday's data showed U.S. inflation rising to 2.7% in the 12 months through March, surpassing the U.S. Federal Reserve's target of 2%. This reduced the likelihood of interest rate cuts, which could have stimulated economic growth and consequently oil demand.
The dollar gained strength on the expectation of sustained higher interest rates, making oil more expensive for holders of other currencies.
However, Teng suggested that oil prices might rebound if U.S. inventory data and China's PMI index indicate improvements later in the week.
On Friday, Brent had closed up by 49 cents, with WTI up by 28 cents, largely due to concerns about potential disruptions to supply in the Middle East.
Despite Ukrainian drone strikes on the Ilsky and Slavyansk oil refineries in Russia's Krasnodar region over the weekend, which led to the suspension of some operations at the Slavyansk refinery according to a plant executive, the market appeared to disregard potential supply disruptions.
Paraphrasing text from "Reuters" all rights reserved by the original author.
