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Investing.com– Oil prices slipped lower Monday, extending losses from the prior week as markets remained on edge over slowing demand while largely looking past a tighter supply outlook for 2024.
By 08:45 ET (13.45 GMT), the U.S. crude futures traded 1.5% lower at $76.88 a barrel and the Brent contract dropped 1.2% to $81.14 a barrel.
Chinese demand fears remain in play
Data released over the weekend showed Chinese consumer inflation rose marginally in February, benefiting from increased spending during the Lunar New Year holiday.
But producer price inflation shrank more than expected during the period, signaling that China’s biggest economic drivers, factories, remained largely under pressure.
The readings followed middling import data from China last week. The country imported 10.74 million barrels per day in the January-February period, up 3.3% year-on-year, but down from the 11.39 million barrels per day in December, government data showed.
China also set an underwhelming gross domestic product target for 2024, and has so far offered little cues on any planned stimulus measures to support growth.
Supply still seen tight this year
Concerns over sluggish demand from the biggest crude importer in the world have largely offset market expectations for tighter supplies this year, even after the Organization of Petroleum Exporting Countries said it will maintain its current pace of production cuts.
Disruptions in the Middle East are also expected to persist, as talks over an Israel-Hamas ceasefire fell through.
Saudi Aramco (TADAWUL:2222) is planning to reduce its supply of Arab heavy crude to term customers in Asia starting in April due to oilfield maintenance, while weekly data from Baker Hughes shows that the U.S. oil rigs rose by just two rigs over the last week, with the total oil rig count increasing to 504 for the week ending March 8.
US CPI data, OPEC monthly report awaited
Markets were now focused squarely on key U.S. consumer price index inflation data, due on Tuesday, for more cues on the path of interest rates.
Federal Reserve officials had warned last week that inflation will largely determine when the central bank begins trimming interest rates in 2024. The warning, coupled with a stronger-than-expected nonfarm payrolls reading for February, kept markets on edge over higher-for-longer U.S. interest rates.
Tuesday’s CPI reading is expected to show that inflation remained well above the Fed’s 2% annual target, giving the bank little immediate impetus to cut interest rates.
Reduced interest rates are expected to boost economic activity in the world’s largest energy consumer, likely boosting demand for crude.
Also in the spotlight this week will be the monthly OPEC oil market report, which will include monthly production numbers for the group along with its latest outlook for the oil market.
(Ambar Warrick contributed to this article.)
Source: Investing.com