Oil prices cool after strong gains on supply concerns; Econ. data awaited

Investing.com-- Oil prices moved in a tight range in early Asian trade on Tuesday, seeing some pullback after supply disruptions in the U.S. and Russia triggered strong gains, while caution before key economic readings also kept prices muted.

Russia halted operations at a key fuel export terminal after an alleged attack by Ukrainian forces, while severe cold weather conditions in the U.S. spurred stoppages at several oil producing sites.

The new supply disruptions came amid persistent geopolitical unrest in the Middle East, as the Israel-Hamas war raged on, while the Iran-backed Houthi group kept up with its attacks on ships in the Red Sea.

This offered some support to oil prices, on the notion of supply disruptions creating tighter markets in the coming months.

Brent oil futures expiring in March fell 0.1% to $80.0 a barrel, while West Texas Intermediate crude futures fell 0.1% to $74.58 a barrel by 20:06 ET (01:06 GMT). The two were close to their highest point for 2024, after marking a rough start to the year on persistent concerns over slowing demand.

Demand concerns remain in play before key econ data

But concerns over sluggish oil demand remained in the fore, limiting any major gains in crude. Signs of a slowing economic recovery in top importer China were a key point of contention for oil markets, after the country clocked weaker than expected gross domestic product (GDP) figures for the fourth quarter.

Growing expectations of higher-for-longer U.S. interest rates also weighed on oil markets, especially as waning bets of early interest rate cuts by the Federal Reserve spurred strength in the dollar.

Focus is now on a string of key U.S. indicators due this week for more cues on the world’s largest economy. Fourth-quarter GDP data is due on Thursday and is expected to show some cooling in growth.

PCE price index data- the Fed’s preferred inflation gauge- is due on Friday, and is expected to reiterate that inflation remained sticky through December, giving the central bank more impetus to keep rates higher for longer.

A string of purchasing managers index readings from several major economies are also due in the coming weeks, and are expected to show sustained weakness in business activity across the globe.

Before the economic data, traders will also have to navigate central bank meetings in Japan and the euro zone.

Concerns over worsening global economic conditions- amid high interest rates and stubborn inflation- were a major weight on crude prices, as traders feared an ensuing slowdown in oil demand.

In the U.S., cold weather was also seen denting fuel demand, with U.S. oil product inventories logging three straight weeks of outsized builds.

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