Oil futures trade near session lows, with U.S. prices below $70 a barrel

Oil prices traded lower on Tuesday, with U.S. prices slipping back below $70 a barrel.

Concerns over the outlook for oil demand, as well as rising oil production from non-OPEC countries such as the U.S., continue to weigh on prices.

U.S. inflation data, meanwhile, showed only a slight climb in November, with analysts noting that the data is unlikely to lead to “imminent” Federal Reserve interest-rate cuts.

Price action

  • West Texas Intermediate crude for January



    delivery shed $2.30, or 3.2%, to $69.02 a barrel on the New York Mercantile Exchange.

  • February Brent crude

    the global benchmark , shed $2.27, or nearly 3%, at $73.76 a barrel on ICE Futures Europe.

  • January gasoline

    shed 2.2% to $1.9976 a gallon, while January heating oil

    fell 3.4% to $2.519 a gallon on Nymex.

  • Natural gas for January delivery

    declined by 3.1% to $2.355 per million British thermal units.

Market drivers

Oil futures lost more ground following the release of the U.S. CPI Index reading for November.

The U.S. cost of living rose a scant 0.1% in November thanks to lower oil prices. Economists polled by the the Wall Street Journal had forecast a second straight flat reading in the consumer-price index.

If food and gas are set aside, so-called core consumer prices rose a somewhat sharper 0.3% last month and matched the Wall Street forecast.

While it looks like Federal Reserve policy is working, inflation is nowhere near the Fed’s 2% target, said Jason Schenker. president and chief economist of Prestige Economics. “Hopes of imminent Fed rate cuts are likely to be dampened” by the inflation report.

The Fed will announce its latest decision on monetary policy at the end of its two-day meeting Wednesday.

Oil prices had settled modestly higher on Monday following a seven-week losing streak that was the worst for U.S.-traded crude since 2018.

New concerns over excess supply and a slowing demand have outweighed the ongoing Middle East conflict, said StoneX’s Kansas City energy team, led by Alex Hodes, said in a Tuesday note.

The BBC reported Tuesday that Yemeni’s Iran-backed Houthi rebels hit a Norwegian tanker with at least one missile, leading to a fire.

The Houthis have claimed that the tanker was a crude oil tanker headed to Israel, as the “rebels have stepped up actions to insert themselves in the middle of the Israel-Hamas conflict,” said StoneX’s Kansas City energy team. “Tensions are undoubtedly rising in the Middle East and shipping lanes carry more risk than before the conflict began.”

Still, “it is important to note that attacks have not shifted toward Saudi oil facilities and thus crude oil prices remain unaffected by the rising tensions,” they said.

Also, “demand for crude oil typically picks up this time of year with refineries running at high utilization rates on the heels of fall turnarounds,” said the energy team at StoneX. “Combine that with the announced production cuts by OPEC+, and things seemed like they were tilted bullish for crude oil prices just a few weeks ago.”

However, has quickly “shifted with a well-supplied gasoline market and increasingly better-supplied distillate market weighing on refiners’ margins,” they said. “Add a drop off in China’s crude imports to 5-month lows to our current lull in refined products demand, we’re seeing an increasingly well-supplied crude market.”

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