Oil prices dropped by 3%, extends losses after US inflation data

On Tuesday, oil prices dropped by 3%, as the CPI report showed that U.S. consumer prices rose in November. This added to existing concerns about excess supply and slowing demand, even though there was some support from supply risks in the Middle East.

Brent crude futures for February fell to $73.73 per barrel, the lowest since June, while U.S. West Texas Intermediate crude for January slipped to $68.93. This indicates that the Federal Reserve is unlikely to cut interest rates in the near future. 

Tamas Varga, a broker from PVM, said that sentiment remains pessimistic and there is no assistance from the demand side of the oil equation, making the overall situation discouraging. In 2024, global oil demand growth is predicted to slow down, and there is a disagreement between OPEC and the International Energy Agency regarding the extent of this slowdown. 

The recent OPEC+ deal to restrict supply did not impress the market. This week, both OPEC and the IEA will release updated forecasts. Now that U.S. inflation figures have been released, investors are eagerly anticipating the outcome of the Federal Reserve meeting on Wednesday. It is widely expected that the central bank will maintain current interest rates. 

According to Nathaniel Casey, an investment strategist at wealth manager Evelyn Partners, the inflation report met expectations. However, Casey noted that progress towards the Federal Reserve's 2% target appears to be slowing. 

The COP28 climate summit is also receiving attention, as negotiators are eagerly awaiting a revised deal after criticism of a previous version that lacked a "phase-out" of fossil fuels. Additionally, the upcoming U.S. inventory reports are anticipated to reveal a 1.5 million-barrel decrease in crude stocks. The American Petroleum Institute will release the first report at 2130 GMT. 

According to Reuters.