Written by Florence Tan
SINGAPORE (Reuters) – Oil prices continued to decline on Monday amid signs of weak demand for fuel and at a time when statements by Federal Reserve officials (the US central bank) weakened hopes for lowering interest rates, which could lead to slowing growth and reducing demand. On fuel in the world's largest economy.
By 0505 GMT, futures contracts fell 25 cents, or 0.3 percent, to $82.54 per barrel, while US West Texas Intermediate crude futures reached $78.07 per barrel, down 19 cents, or 0.2 percent.
“Oil markets have ignored the impact of conflicts in the Middle East and turned attention to the global economic outlook once again,” said Tina Teng, an independent analyst based in Auckland.
China's producer price index contracted in April, indicating that trade demand remains sluggish, she said, adding that recent US economic data also indicate a slowdown.
Both benchmarks settled lower by about $1 on Friday as Federal Reserve officials debated whether U.S. interest rates were high enough to bring inflation back to 2%, offsetting gains made earlier last week from the conflict between Israel and Gaza.
Analysts expect the US central bank to keep interest rates at the current level for a longer period, which will support the dollar. The rise in the US currency makes dollar-denominated oil more expensive for investors who hold other currencies.
Oil prices also fell amid signs of weak demand, with US gasoline and distillate inventories rising in the week before the start of the US driving season, ANZ analysts said in a note.
Refineries around the world are facing a decline in diesel profits as new refineries boost supplies, as the weather moderates in the Northern Hemisphere and economic activity slows, affecting demand.
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However, the market remained supported by expectations that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, may extend supply cuts into the second half of the year.
Iraq, OPEC's second-largest producer, is committed to the voluntary oil production cuts approved by OPEC and is keen to cooperate with member states in efforts to achieve greater stability in global oil markets, the Iraqi Oil Minister told the official news agency on Sunday.
The minister's comments followed his suggestion on Saturday that Iraq had made enough voluntary cuts and would not agree to any additional cuts proposed by the broader OPEC+ producer group at its meeting in early June.
Earlier this month, OPEC+ called on Iraq to pump more than its production quota by a cumulative 602,000 barrels per day in the first three months of 2024. The group said Baghdad agreed to compensate with additional production cuts during the rest of the year.
In the United States, the number of oil rigs fell by three rigs to 496 rigs last week, the lowest level since November, Baker Hughes said in its weekly report on Friday.