By Georgina McCartney
HOUSTON (Reuters) -Oil prices fell 1% lower on Tuesday as it looked likely that persistent U.S. inflation would keep interest rates high for longer, weighing on fuel demand.
futures fell 83 cents, or 1%, to $82.88 a barrel. U.S. West Texas Intermediate Crude (WTI) futures for June, which expired on Tuesday, fell 54 cents, or 0.7%, to $79.26.
The more active July contract fell 64 cents to $78.66.
Higher borrowing costs could slow economic growth and put pressure on oil demand.
“The market is very focused on US gasoline demand as there are signs that consumers are cutting back on inflation. Unless that turns around, the market suggests things could look a bit bleak,” says Phil Flynn, analyst at Price. Futures Group.
Ahead of this weekend’s Memorial Day holiday, which kicks off the U.S. summer season, gasoline prices fell for the fourth week in a row to $3.58 per gallon on Monday, the Energy Information Administration (EIA) said in its gasoline and diesel fuel update.
The U.S. will sell the nearly 1 million barrels of gasoline in a reserve in northeastern states, with bids due May 28, the Energy Department said Tuesday.
U.S. diesel prices also fell, down 5.9 cents on Monday to $3.89 per gallon, according to the EIA. Diesel is an important refined product for both the industrial and transport sectors.
Investors are awaiting the minutes of the Fed’s latest policy meeting on Wednesday, as well as weekly U.S. oil inventory data from the EIA, also due on Wednesday.
“There is nothing in the market right now that is pushing prices higher. If we see a little bit of equity draw tomorrow, that could help push prices back up to the $78.50-$80 per barrel range,” says Tim Snyder, economist at Matador. Economy.
Oil and gasoline inventories rose last week while distillates fell, according to market sources citing figures from the American Petroleum Institute (API) on Tuesday.
The API figures show crude inventories rose by 2.48 million barrels in the week ended May 17, the sources said on condition of anonymity. Gasoline inventories rose by 2.1 million barrels and distillates fell by 320,000 barrels.
Two Federal Reserve policymakers said on Tuesday that it would be wise for the US central bank to wait a few more months to ensure inflation is back on track to the 2% target before beginning rate cuts.
The economic prospects in Europe are more positive. Christine Lagarde, president of the European Central Bank, said in an interview that she was “really confident” that inflation in the euro zone is under control. The ECB has all but promised a rate cut on June 6, so policymakers have turned their attention to discussing where rates will go next.
The market appeared largely unaffected by the death of Iranian President Ebrahim Raisi, a hardliner and potential successor to Supreme Leader Ayatollah Ali Khamenei, in a helicopter crash on Sunday.
The Brent contract structure is weakening, indicating a weaker market and strong supply.
The first-month Brent contract’s premium over the second-month contract fell to 10 cents, the weakest since January.
