Oil prices extend decline on interest rate outlook

SINGAPORE — Oil prices fell on Monday, extending losses from the previous session after the dollar rose amid market concerns that higher-than-expected inflation could delay cuts to high US interest rates that have been capping global fuel demand growth.

Brent crude futures fell 35 cents or 0.4% to $81.27 a barrel by 0419 GMT, while US West Texas Intermediate (WTI) crude futures declined 35 cents or 0.5% to $76.14 a barrel as the US dollar strengthened. A stronger dollar makes oil more expensive for holders of other currencies.

The dip built on losses last week, when Brent declined about 2% and WTI fell more than 3% on indications that US interest rate cuts could be delayed by two months due to an uptick in inflation.

Oil prices have been trading between $70 and $90 a barrel since November, as rising supply in the US and concerns of weak demand in China offset OPEC+ supply cuts despite two wars raging.

The geopolitical risk premium from Yemeni Houthis’ attacks on ships in the Red Sea remained modest at only a $2 a barrel boost to Brent, Goldman Sachs analysts said in a note.

However, the bank has raised its summer peak price to $87 a barrel, up from $85, as Red Sea disruptions have driven largerthan-expected draws in stocks held by countries that are members of the Organization for Economic Co-operation and Development.

Goldman Sachs still expects oil demand to grow by 1.5 million barrels per day in 2024 but has cut China’s forecast while raising that for the US and India.

As the Israel-Hamas conflict continues in the Middle East, White House national security adviser Jake Sullivan told CNN on Sunday that negotiators for the United States, Egypt, Qatar, and Israel had agreed on the basic contours of a hostage deal during talks in Paris but are still in negotiations. Israeli Prime Minister Benjamin Netanyahu said it was not clear yet whether a deal would materialize.

Adding to global energy supplies, Qatar will further raise liquefied natural gas production despite a recent steep drop in global prices.

In the US, the ANZ analysts anticipated oil stockpiles could start to fall in the coming weeks as refineries return from maintenance, which could offer some support to prices. —