Oil Prices Dip as Investors Worry About Demand Outlook – Reuters

By Arathy Somasekhar

HOUSTON (Reuters) – Crude oil prices decreased by 1% on Tuesday, influenced by disappointing U.S. consumer confidence data that raised concerns about the economic outlook and the potential impact on fuel demand, especially following a sluggish start to the U.S. summer driving season.

Futures for August settled down $1, or 1.2%, at $85.01 per barrel, while other futures settled at $80.83, a decline of 80 cents or 1%.

In the previous week, both benchmarks experienced a gain of approximately 3%, marking two consecutive weeks of increases and reaching their highest levels since April.

U.S. consumer confidence showed a decline in June. Despite households remaining optimistic about the labor market and expecting inflation to ease, worries about the economy could impact gasoline demand.

High inventory levels have caused oil traders to feel uneasy about summer driving demand. Reports indicate that U.S. crude stocks increased by 914,000 barrels in the week ending June 21, along with a rise in gasoline inventories of 3.843 million barrels, while distillate stocks fell by 1.178 million barrels. Official government data is expected on Wednesday.

A preliminary poll suggested that U.S. crude and gasoline stockpiles would likely show declines, while distillate inventories were anticipated to rise last week.

Investors are also evaluating when the Federal Reserve might implement interest rate cuts. Fed Governor Lisa Cook indicated on Tuesday that a rate cut is probable if the economy behaves as anticipated, but she refrained from specifying a timeline for any potential action by the U.S. central bank.

“The decision on interest rates remains mixed, and much of the crude market has already factored in a quarter-point cut by September,” stated Dennis Kissler, senior vice president of trading at BOK Financial.

Oil prices found some support from supply disruptions linked to Ukrainian attacks on Russian oil facilities. On June 21, Ukrainian drones targeted four refineries, including the Ilsky refinery, which is one of the key fuel producers in southern Russia.

Concerns regarding heightened tensions between Israel and the Iran-backed group Hezbollah have also placed upward pressure on oil prices, analysts noted. Israeli airstrikes in Gaza City early on Tuesday reportedly resulted in the deaths of at least 24 Palestinians, as confirmed by Gaza health officials.

Over eight months into the conflict, international mediation supported by the U.S. has yet to produce a ceasefire agreement.

"Geopolitical pressures are causing turmoil in the oil market from various fronts. These tensions are expected to continue in light of unsuccessful ceasefire negotiations," commented Claudio Galimberti, a director at Rystad Energy.