Investing.com — Oil prices edged lower on Tuesday as investors waited for new updates on weekly crude inventories amid continued concerns about the impact of higher, longer-lasting U.S. interest rates on oil demand and uncertainty in the Middle East .
At 2:30 PM ET (18:30 GMT), the price was down 1% at $82.88 per barrel, while the stock was down 0.7% at $79.26 per barrel.
Weekly update of crude oil stocks
The drop in oil prices comes ahead of inventory data from the American Petroleum Institute later Tuesday and a further report from EIA expected Wednesday.
Crude oil inventories fell much more than expected in the week ending May 9, data last week showed. This fueled hopes that demand will gain momentum ahead of the summer driving season.
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Fears of prolonged high U.S. interest rates were a major pressure point for crude markets after a series of Fed officials warned of such a scenario amid persistent inflation.
Vice President Philip Jefferson said Monday it was too early to say whether the delay would be “prolonged.” Vice President Michael Barr noted that restrictive policies require more time, blunting hopes for early cuts.
There will be more Fed speakers on Tuesday, including Barr again, as well as FOMC members Thomas Barkin, John Williams and Raphael Bostic, ahead of Wednesday’s release of the Fed’s late April meeting.
High interest rates are expected to dampen activity in the world’s largest economy, likely hurting demand for crude oil, while also limiting the money supply for investment and economic growth, which typically support oil demand.
The International Energy Agency last week lowered its outlook for crude oil demand this year, citing concerns about weaker economic conditions due to interest rate pressure.
On the other hand, the Organization of the Petroleum Exporting Countries maintained its demand forecast, citing the strength of top exporter China.
China has been a point of confidence for oil demand, especially as Beijing has introduced a series of stimulus measures in recent weeks to support growth.
Political uncertainty in the Middle East
Iranian President Ebrahim Raisi, who was seen as successor to Supreme Leader Ayatollah Ali Khamenei, was killed in a helicopter crash over the weekend, while there are concerns about the health of Saudi King Salman bin Abdulaziz after Crown Prince Mohammed Bin Salman made a trip had postponed to Japan.
While these events have not yet affected supply, they have created a degree of political uncertainty in two major oil producing countries.
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The OPEC meeting waited for more signals
Oil markets were also awaiting a meeting in June where the cartel, along with its allies including Russia, will discuss production policy, including whether voluntary supply cuts of 2.2 million barrels per day from mainly Saudi Arabia should be imposed. be extended.
The group, known as OPEC+, could extend some voluntary cuts beyond the initial June deadline if demand does not pick up.
“While the market awaits clarity from OPEC+ on its production policy for the second half of the year, there are some signs of weakness in the market,” ING analysts said in a note.
“Refinery margins have been lower for some time, raising the prospect of refinery production cuts, especially in Asia. In addition, the physical crude oil market is also weaker.”
(Peter Nurse, Ambar Warrick contributed to this article.)
