The price of oil fell by about 0.5%, as recent US data reinforced the likelihood that the Fed will keep interest rates at current levels for longer, which will limit the growth of global fuel demand. Investors are also awaiting fresh clues about global demand and balances in March and beyond.
Last week, Brent crude fell by about 2% and WTI oil prices fell by more than 3%, as markets pushed out the start of U.S. interest rate cuts by two months due to an uptick in inflation.
However, oil has been trading in a narrow range for the past two weeks - about $3 per barrel - as tensions in the Middle East and OPEC+ supply constraints offset the impact of increased production outside the group, including the United States. OPEC+ is expected to extend current production cuts for the next quarter at its meeting in early March.
As for the demand outlook, in China, the boom in travel during the Lunar New Year holidays has raised hopes for a more sustainable recovery in consumption.
Meanwhile, the premium for geopolitical risk against the background of the Israel-Hamas conflict remains modest. However, Goldman Sachs experts said that Red Sea disruptions led to a more significant than expected reduction in reserves in countries that are members of the Organization for Economic Cooperation and Development (OECD). Goldman Sachs still expects oil demand to grow by 1.5 million barrels per day in 2024, but at the same time lowered its forecast for China and raised it for the United States and India.
Meanwhile, ANZ analysts said U.S. crude inventories are likely to begin to shrink in the coming weeks as refineries return from maintenance, which may provide some support to prices.