Africa-Press – Mozambique. Oil prices declined on Monday as protracted concerns over the US economy and likely delays in the Federal Reserve’s (Fed) interest rate cut negatively impacted market sentiment over oil demand growth in the world’s largest oil-consuming country.
The international benchmark crude Brent traded at $82.93 per barrel at 10.14 a.m. local time (0714GMT), a 0.65% decrease from the closing price of $83.47 a barrel in the previous trading session on Friday.
The American benchmark, West Texas Intermediate (WTI), traded at the same time at $77.89 per barrel, down 0.72% from Friday’s close of $78.46 per barrel.
Oil prices faced a downturn at the start of the week, driven by concerns that the Fed might postpone lowering its interest rates following indicators of recent macroeconomic data and contrary to previous expectations.
Recent figures from the US Commerce Department have compounded these concerns, with January’s retail sales data revealing a significant drop. Sales fell by 0.8% to $700.3 billion, marking a more considerable decline than the forecasted 0.2%. This downturn in consumer spending is seen as a potential indicator of a broader economic slowdown, which could influence the Fed’s monetary policy decisions.
Market participants have been closely eyeing the Fed’s moves, with a general consensus previously leaning towards steady policy rates. However, expectations are now adjusting, with a 75% likelihood assigned to the Fed initiating rate cuts by June, a timeline that suggests a cautious approach to stimulating the US economy.
Investors are awaiting the minutes of the Fed’s latest Federal Open Market Committee (FOMC) meeting, set to be released on Wednesday, for any hints regarding the central bank’s future actions.
Further adding to concerns over the country’s economy and oil demand trajectory, the Energy Information Administration (EIA) last week reported an unexpected surge in crude oil inventories, with stocks climbing by 12 million barrels to 439.4 million barrels last week.
Surpassing analyst predictions of an 8.5 million barrel rise, the data suggests a potential oversupply in the market that could continue to exert downward pressure on oil prices.
Last week’s concerns over a supply glut in 2024 dragged on to the start of this week and exerted downward pressure on prices as the International Energy Agency (IEA) said global oil supply is projected to outpace demand.
“This was in stark contrast to OPEC, which sees more robust consumption amid ongoing supply constraints to support prices in its monthly oil market report,” according to Daniel Hynes, a commodity strategist at Australia and New Zealand Banking Group.
Prices also found some support from data showing that Russia had almost reached its target for voluntary supply reductions for the first time since making the output cut pledge last year, Hynes added.
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