Key points:

  • Brent futures fell 0.7% to $82.92 per barrel, WTI fell 0.5% to $78.78 per barrel.
  • U.S. producer prices have risen more than expected, raising concerns about inflation.
  • Signal from the Fed: politicians are in no hurry to cut interest rates.

On Monday, oil prices experienced a decline as traders refocused on the outlook for demand expansion. Several factors contributed to this shift, including reports of producer prices in the United States surpassing expectations. The United States, being the world’s largest oil consumer, raised concerns that sustained inflation and increased interest rates could curtail the growth in fuel consumption.

Brent crude futures recorded a decrease of 55 cents, equivalent to 0.7%, settling at $82.92 per barrel. Simultaneously, the March U.S. West Texas Intermediate crude contract, set to expire on Tuesday, saw a decline of 41 cents, or 0.5%, reaching $78.78.

Producer price report results

In January, U.S. producer prices experienced a higher-than-anticipated increase, primarily propelled by substantial rises in service costs, raising concerns about inflation. Furthermore, Federal Reserve policymakers reiterated their “tolerance” for interest rate cuts on Friday. The prospect of higher rates tends to bolster the expenses associated with purchasing oil, contributing to a bearish sentiment in the market.

Adding to the uncertainty, the direction of demand from the Chinese market remains uncertain as it resumes activities after the Lunar New Year holiday. Market participants are keen to observe how this return will impact overall demand.

The question of oil demand remains open

“The market was also reminded of the uncertain demand outlook. The International Energy Agency has warned that growth is expected to slow in 2024.”

– said ANZ. The agency anticipates a surplus in the market throughout the entire year.

Additionally, there is a likelihood of a vote in the UN Security Council on Tuesday regarding an Algerian proposal calling for an immediate humanitarian ceasefire in the Israel-Hamas conflict. The United States has indicated its intention to veto the decision, as per diplomats’ statements.