Mumbai, 21 May (Commoditiescontrol): Crude oil prices fell in early Asian trade on Tuesday, as investors anticipated that prolonged U.S. inflation and higher interest rates would suppress consumer and industrial demand. Brent crude futures declined 12 cents, or 0.1%, to $83.34 a barrel, while U.S. West Texas Intermediate (WTI) eased 8 cents, or 0.1%, to $79.72 a barrel.
Both benchmarks had fallen less than 1% on Monday after U.S. Federal Reserve officials indicated they were waiting for more definitive signs of slowing inflation before considering any interest rate cuts. Fed Vice Chair Philip Jefferson noted on Monday that it was too early to determine if the inflation slowdown is "long-lasting." Similarly, Vice Chair Michael Barr stated that the restrictive policy needed more time, and Atlanta Fed President Raphael Bostic remarked that it would "take a while" for the central bank to be confident in a sustainable slowdown in price growth.
Lower interest rates typically reduce borrowing costs, potentially boosting economic growth and demand for oil. However, the global physical crude oil markets are showing signs of weakness due to soft refinery demand and ample supply, traders and analysts told Reuters, suggesting further potential declines in benchmark crude futures.
Political uncertainties in two major oil-producing countries appeared to have little impact on the market. Iranian President Ebrahim Raisi, a hardliner and potential successor to Supreme Leader Ayatollah Ali Khamenei, died in a helicopter crash, while Saudi Arabia's Crown Prince Mohammed Bin Salman postponed a trip to Japan due to the health of his father, King Salman.
Investors are now focusing on the supply outlook from the Organization of the Petroleum Exporting Countries and its affiliates, known as OPEC+. They are scheduled to meet on June 1 to discuss output policy, including whether to extend some members' voluntary cuts totaling 2.2 million barrels per day. According to Reuters, OPEC+ might extend these cuts if demand does not pick up, citing unidentified sources.
With inflation and interest rate dynamics at play, and potential output decisions from OPEC+ on the horizon, the oil market remains poised for continued volatility.
(By Commoditiescontrol Bureau: 09820130172)
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