Market Analysis

Oil prices dipped in early Asian trading on Tuesday as investors anticipated that prolonged high U.S. inflation and interest rates would dampen both consumer and industrial demand.

Brent crude futures slipped by 12 cents to $83.34 a barrel, while U.S. West Texas Intermediate crude (WTI) edged down by 8 cents to $79.72 a barrel.

The modest decline in both benchmarks on Monday came as U.S. Federal Reserve officials signaled they were waiting for further signs of inflation easing before considering interest rate adjustments.

Analyst Toshitaka Tazawa from Fujitomi Securities noted that concerns over weaker demand prompted selling, particularly as the possibility of a Fed rate cut appeared more distant.

Federal Reserve Vice Chair Philip Jefferson cautioned on Monday that it was premature to determine if the inflation slowdown would persist, echoing sentiments expressed by Vice Chair Michael Barr and Atlanta Fed President Raphael Bostic.

Lower interest rates typically reduce borrowing costs, potentially stimulating economic growth and consequently, demand for oil.

Meanwhile, global physical crude oil markets are experiencing a softening due to subdued refinery demand and ample supply, according to insights from traders and analysts.

Despite political uncertainty in key oil-producing nations, including the death of Iranian President Ebrahim Raisi in a helicopter crash and Saudi Arabia's Crown Prince Mohammed Bin Salman deferring a trip to Japan due to his father's health, the market seems largely unfazed. Analyst Tazawa remarked that the impact on energy policy remains uncertain.

Investor attention remains focused on the upcoming meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on June 1, where discussions will center on output policy, including the potential extension of voluntary production cuts by some members totaling 2.2 million barrels per day.

Paraphrasing text from "Reuters" all rights reserved by the original author.