Oil Prices Slump amid Weak Fuel Demand and Interest Rate Uncertainty

Oil prices continued to fall on Monday due to indications of weak fuel demand and the impact of comments from US Federal Reserve officials that decreased optimism regarding interest rate cuts. Both Brent crude and West Texas Intermediate crude dropped by 0.3% each, to $82.53 and $78.03 per barrel respectively, following losses of around $1 each on Friday. The strength of the US dollar, which makes dollar-denominated oil more expensive for non-US investors, is also contributing to the decrease in prices. Analysts predict that the US central bank will maintain its current policy rate for an extended period, further supporting the value of the dollar. Other factors influencing oil prices include rising US gasoline and distillate inventories before the summer driving season and the difficulties encountered by refiners worldwide in generating earnings from diesel, as new refineries increase supply and reduced demand caused by mild weather and weak economic activity in the northern hemisphere. Nevertheless, the market remains buoyant thanks to anticipations that OPEC+ may prolong production restrictions until the second half of the year. Iraq, OPEC’s second-largest producer, reiterated its dedication to implementing previously agreed-upon output reductions in a statement released by its state news agency on Sunday, whilst emphasizing its readiness to collaborate with fellow OPEC nations in pursuit of greater stability within the global oil market. Earlier this month, OPEC+ criticized Iraq for exceeding its allotted output quotas by 602,000 barrels per day during the first quarter of 2024, requiring Iraq to make up for the oversight over the remainder of the year. (Source: Reuters)