Oil fell 3% on Tuesday, with Brent crude hitting the lowest since June after U.S. consumer prices rose in November, offering more evidence that the Federal Reserve was unlikely to pivot to interest rate cuts early next year.
The CPI report added to downward pressure earlier coming from concern over excess supply and slowing demand, despite support from escalating supply risks in the Midde East after an attack by the Iran-aligned Houthis on a tanker.
Brent crude futures for February fell $2.30, or 3%, to $73.73 per barrel by 1458 GMT and traded as low as $73.56, the lowest since June. U.S. West Texas Intermediate crude for January slipper $2.39, or 3.4%, to $68.93.
“Sentiment remains negative”, said Tamas Varga of broker PVM. “There is no helping coming from the demand side of the oil equation. The fundamental backdrop is discouraging”.
Global oil demand growth is set to slow in 2024 with OPEC and the International Energy Agency split on the extent, and a recent OPEC+ deal to limit supply underwhelmed the market. OPEC and the IEA both update their forecast this week.
With U.S. inflation figures out of the way, investors are not awaiting the outcome of Wednesday’s Federal Reserve meeting. The central bank is widely expected to keep rates on hold.
Nathaniel Casey, investment strategist at wealth manager Evelyn Partners, said the inflation report was very much in line with expectations.
“But while inflation continues to decelerate towards the Federal Reserve’s 2% target, progress towards this objective seems to be slowing”, he added.
Also in focus are talks at the COP28 climate summit, where negotiators are awaiting a new draft deal after many countries criticized a previous version as too because it omitted a “phase-out” of fossil fuels.
And coming into view are the latest U.S. inventory reports, which are expected show a 1.5 million-barrel drop in crude stocks. The first report is at 2130 GMT from the America Petroleum Institute.