Oil prices declined in early Asian trading on Tuesday as investors anticipated persistent U.S. inflation and the likelihood of higher interest rates, which could dampen consumer and industrial demand. Brent crude futures fell by 44 cents, or 0.53%, to $83.27 a barrel by 0313 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude slipped 51 cents, or 0.64%, to $79.29 a barrel.
This downward trend follows a minor decline of less than 1% on Monday, spurred by comments from U.S. Federal Reserve officials who indicated they were waiting for more definitive signs of slowing inflation before considering interest rate cuts. “Fears of weaker demand led to selling as the prospect of a Fed rate cut became more distant,” noted analyst Toshitaka Tazawa of Fujitomi Securities.
Fed Vice Chair Philip Jefferson stated on Monday that it was too early to determine if the inflation slowdown was “long lasting,” while Vice Chair Michael Barr emphasized the need for more time for restrictive policies to take effect. Additionally, Atlanta Fed President Raphael Bostic mentioned that it would “take a while” for the central bank to be confident in a sustainable slowdown in price growth.
Lower interest rates generally reduce borrowing costs, potentially boosting economic growth and increasing demand for oil. Despite this, the oil market showed little reaction to political uncertainties in two major oil-producing countries, suggesting that investor focus remains firmly on economic indicators and monetary policy expectations.
