Oil prices drop amid concerns over US economic downturn

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, a 0.65% decrease from the closing price of $83.47 a barrel in the previous trading session on Friday.

The US 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 $700.3bn, 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.

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. Surpassing analyst predictions of an 8.5mn barrel rise, the data suggests a potential oversupply in the market that could continue to exert downward pressure on oil prices.