By Laila Kearney
NEW YORK (Reuters) – Oil futures fell from their highest level in several weeks on Monday on weakness in consumer spending in China, the world’s biggest oil importer, and as investors halted purchases ahead of the U.S. Federal Reserve’s interest rate decision .
futures settled at $73.91 a barrel, down 58 cents, or 0.8%, after hitting their highest since Nov. 22 on Friday.
U.S. West Texas Intermediate crude settled at $70.71 a barrel, losing 58 cents and also down 0.8% on the session after registering its highest close since Nov. 7.
Last week, oil benefited from expectations of tightening supply with additional sanctions on oil producers Russia and Iran, while possible lower interest rates in the US and Europe would boost demand.
“We believe last week’s events were priced appropriately and this week will see fewer items that could support oil prices,” said Jim Ritterbusch of consultancy Ritterbusch and Associates in Florida.
Chinese retail sales were slower than expected, keeping pressure on Beijing to ramp up stimulus for a fragile economy that faces U.S. trade tariffs under a second Trump administration.
“It’s just a very bearish scenario where there’s not much hope for crude demand growth,” said Bob Yawger, managing director of Energy Futures at Mizuho (NYSE:) in New York.
The Chinese outlook contributed to oil producer group OPEC+’s decision to postpone plans for higher production until April.
“Whatever incentive measure is deployed, consumers are not going along with it; and without a serious change in personal spending behavior, China’s economic fortunes will be hampered,” said John Evans of oil broker PVM.
Traders also took profits ahead of the US Central Bank’s interest rate decision this week.
IG market analyst Tony Sycamore said slight profit-taking was to be expected after prices rose more than 6% last week.
He noted that many banks and funds have likely closed their books due to reduced interest in positions during the holiday season.
The Fed is expected to cut rates by a quarter of a percentage point at its Dec. 17-18 meeting, which will also provide an updated view of how much Fed officials think they will cut rates in 2025 and perhaps 2026 .
Lower interest rates can stimulate economic growth and increase demand for oil.
Oil prices were further pressured by the US dollar, which briefly hovered around a three-week high against other major currencies ahead of the week of central bank meetings.
The US dollar and commodities such as crude oil tend to trade inversely.
Investors also looked to the U.S. oil inventory reports due this week for guidance.
Oil and distillate inventories are expected to have fallen last week, while gasoline inventories are likely to have risen, a preliminary Reuters poll showed ahead of an American Petroleum Institute report at 4:30 PM EST (2130 GMT) on Tuesday and a report from the Energy Information Administration at 10:30 a.m. EST (1530 GMT) on Wednesday
Four analysts polled by Reuters estimate that crude inventories fell by an average of about 1.9 million barrels in the week to December 13.
