Oil prices fell more than 3% on Tuesday to their lowest level in six months on concerns of oversupply and after U.S. economic data showed an unexpected rise in consumer prices.
Brent crude futures for February settled down $2.79, or 3.7%, to $73.24 a barrel. U.S. West Texas Intermediate crude futures for January slipped $2.71, or 3.8%, to $68.61 a barrel.
In the U.S., the consumer price index unexpectedly rose in November, further bolstering the view the Federal Reserve was unlikely to cut interest rates early next year.
Higher rates for longer could slow economic growth and speaks to a softening oil demand picture, said John Kilduff, partner with Again Capital LLC.
Global oil demand growth is expected to slow in 2024 with OPEC and the International Energy Agency split on the extent. OPEC and the IEA both update their forecasts this week.
“Negative sentiment towards the oil complex is still overpowering at the moment,” Kpler analyst Matt Smith said.
Weak demand and concerns that the OPEC+ deal to curb supplies will not do enough to balance the market weighed on prices, he added. OPEC+ agreed to limit supplies by 2.2 million barrels per day in the first quarter.
Investors are now awaiting the outcome of Wednesday’s Federal Reserve meeting. The central bank is widely expected to keep rates on hold.
The U.S. Energy Information Administration (EIA) lowered its 2024 price forecast for Brent crude by $10 a barrel. Brent would average $83 per barrel, the administration forecast in a monthly report, versus an estimate published last month of $93 per barrel.
Still, the administration expected supply cuts from the OPEC+ deal would help lift Brent prices in the first half of 2024.
U.S. crude oil production is expected to rise by 1.02 million bpd to 12.93 million bpd in 2023 and by 180,000 bpd to 13.11 million bpd in 2024, the EIA said. U.S. crude output hit a current all-time high of 12.31 million bpd in 2019.
U.S. crude stocks fell by 2.3 million barrels in the week ended Dec. 8, according to market sources citing American Petroleum Institute figures on Tuesday.
U.S. government data on stockpiles due on Wednesday is expected to show a 1.5 million-barrel drop in crude stocks.
In the Middle East, Yemen’s Houthis said they attacked a Norwegian commercial tanker in their latest protest against Israel’s bombardment of Gaza, escalating the risk of supply disruptions in the region.
At the COP28 climate summit, negotiators are awaiting a new draft deal after many countries criticised a previous version as too weak because it did not include an agreement to phase-out fossil fuels, reported Reuters.
