Oil drops as sticky US inflation heightens demand concerns

World News
2024-02-19 | 03:57
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Oil drops as sticky US inflation heightens demand concerns
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Oil drops as sticky US inflation heightens demand concerns

Oil prices fell as investor attention returned to the demand outlook after reports of higher producer prices in the US, the world's biggest oil user, stoked worries that sticky inflation and higher interest rates would limit fuel consumption growth.

Brent crude futures were down 55 cents, or 0.7%, at $82.92 a barrel at 0720 GMT. The March contract for US West Texas Intermediate crude, which expires on Tuesday, was 41 cents, or 0.5%, lower at $78.78.

The WTI April contract was down 0.7%, or 54 cents, at $77.92.
Brent and WTI contracts had settled higher on Friday as geopolitical tensions in the Middle East offset slowing demand forecasts from the International Energy Agency.

"WTI and Brent eased on Monday morning as investors re-adjust to demand-side fears after a significant jump in US producer price index numbers," said Phillip Nova analyst Priyanka Sachdeva in a research note.

US producer prices increased more than expected in January amid solid gains in the costs of services, which could amplify inflation worries.

Markets are also yet to see the direction of demand from China after it returns from a week-long Lunar New Year holiday, while Presidents' Day in the United States is set to keep trade relatively muted.

Moreover, Federal Reserve policymakers signaled "patience" toward interest rate cuts on Friday. Higher rates keep up the cost of buying oil, providing for a bearish market trend.

Over the weekend, tension in the Middle East continued as Israeli raids put the Gaza Strip's second-largest hospital out of service, and Yemen's Iran-aligned Houthi fighters claimed responsibility for an attack on an India-bound oil tanker.

The Organization of the Petroleum Exporting Countries (OPEC) could cover "most levels of disruption," ANZ Research analysts said in a client note, as its spare capacity is at an eight-year high of 6.4 million barrels of oil per day.

Reuters

World News

Oil Prices

Inflation

Demand

US

Russia

Middle East

OPEC

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