Oil prices moved little in Asian trade on Tuesday as a rebound rally ran out of steam, with markets awaiting more cues on supply amid worsening geopolitical conditions in Russia and the Middle East.
Strength in the dollar also kept prices largely subdued, as traders began steadily pricing out any chances of early interest rate cuts by the Federal Reserve. The greenback surged to a near three-month high on Monday.
Brent oil futures expiring in April fell 0.1% to $77.94 a barrel, while West Texas Intermediate crude futures fell 0.1% to $72.81 a barrel by 20:17 ET (01:17 GMT).
Middle East, Russia-Ukraine unrest fuel supply concerns
Both oil contracts rebounded about 1% on Monday as several strikes by U.S. forces against the Iran-backed, Yemen-based Houthi Group pointed to sustained geopolitical unrest in the Middle East.
The U.S. also warned of more potential strikes against the Houthis, after the group threatened to keep attacking vessels in the Red Sea. Houthi activity in the Red Sea pointed to potential disruptions in oil shipments to Europe and Asia, which in turn raised concerns over tighter global supplies.
The Israel-Hamas war- which is at the heart of recent instability in the Middle East, also showed no signs of de-escalation, as recent reports of a ceasefire appeared to be unfounded.
In Russia, media reports said that Ukraine had carried out drone strikes against one of the largest oil refineries in the country, which is expected to dent oil product exports from the country.
The prospect of tighter supplies could somewhat help offset persistent concerns over slowing oil demand this year, especially in the face of a weak Chinese economic recovery and higher for longer U.S. interest rates.
Concerns over sluggish demand had spurred an over 7% loss in oil prices last week, largely wiping out their gains for 2024.
Record-high U.S. production and underwhelming output cuts from the Organization of Petroleum Exporting Countries has also raised doubts over just how tight oil markets will be in 2024.
Still, recent signs of economic strength in the U.S. indicated that demand will at least remain steady in the world’s largest fuel consumer.
Focus this week is on more signals from Federal Reserve officials, after Chair Jerome Powell largely reiterated his stance on keeping interest rates steady in the near-term. Chinese inflation data for January is also on tap, coming just before the beginning of the week-long Lunar New Year holiday.
