Oil prices experienced a slight decline in Asian trading on Monday, primarily due to ongoing concerns about a potential slowdown in demand. These worries overshadowed fears of potential supply disruptions resulting from new attacks in the Red Sea.
The Houthi group, aligned with Iran and based in Yemen, claimed responsibility for an oil tanker attack in the Red Sea, indicating continued geopolitical instability in the Middle East.
Despite conflicts in the region, particularly the recent Israel-Hamas war, supporting oil prices, concerns about delayed oil deliveries to Asia and Europe emerged due to the Red Sea fighting.
However, the gains in crude oil were constrained by apprehensions regarding sluggish demand. Factors such as persistently higher U.S. interest rates and worsening global economic conditions contributed to this apprehension.
The International Energy Agency's warning of a demand slowdown in 2024 coincided with data revealing recessions in the UK and Japan.
Brent oil futures expiring in April dropped 0.7% to $82.91 per barrel, while West Texas Intermediate crude futures fell 0.7% to $77.91 per barrel by 20:22 ET (01:22 GMT). Both contracts had risen approximately 2% in the previous week.
Trading volumes were expected to be subdued on Monday due to a U.S. market holiday. Although oil prices saw two consecutive weeks of gains, they failed to break out of the trading range established in 2024. The strength of the dollar, particularly following robust U.S. inflation readings last week, exerted downward pressure on crude prices.
The dollar stabilized in Asian trade on Monday. Stronger-than-expected U.S. consumer and producer inflation data heightened concerns that the Federal Reserve might not cut interest rates early in 2024, bolstering the dollar. Higher interest rates are generally unfavorable for crude demand as they can dampen economic activity.
Additionally, data from last week indicated that U.S. oil production remained at record highs, exceeding 13 million barrels per day. The robust U.S. production is anticipated to offset any supply shortfalls resulting from disruptions in the Middle East or output cuts by the Organization of the Petroleum Exporting Countries (OPEC).
Paraphrasing text from "Investing" all rights reserved by the original author.
