Investing.com– Oil prices retreated slightly Monday amid persistent concerns over a looming demand slowdown, which largely offset fears of potential supply disruptions from new attacks in the Red Sea.
By 08:15 ET (13.15 GMT), the futures traded 0.3% lower at $78.26 a barrel and the contract dropped 0.2% to $83.27 a barrel, in quiet trading on account of a U.S. market holiday.
The Yemen-based, Iran-aligned Houthi group claimed responsibility for an attack on an oil tanker in the Red Sea, presenting little deescalation in geopolitical instability in the Middle East.
A growing conflict in the Middle East, especially in the wake of the Israel-Hamas war, has been a key point of support for oil prices, especially as fighting in the Red Sea pointed to delayed oil deliveries to several parts of Asia and Europe.
Front-month Brent and WTI futures last week gained about 1.5% and 3% respectively, reflecting increasing risk of Middle East conflict widening.
Demand concerns remain
However, the market has started the new week on the back foot on concerns over sluggish demand, especially in the face of higher for longer U.S. interest rates and worsening economic conditions across the globe.
Stronger-than-expected U.S. and inflation data released last week ramped up concerns that the Federal Reserve will have little impetus to cut interest rates early in 2024.
Higher rates bode poorly for crude demand, given that they stifle economic activity.
The International Energy Agency had last week warned of a demand slowdown in 2024, with the warning coming just as data showed the U.K .and Japan entering a recession.
Recent dollar strength weighs
While oil prices clocked two straight weeks of gains, they failed to make any major headway beyond a trading range established so far in 2024. Strength in the , especially following strong U.S. inflation readings from last week, also weighed on crude.
The greenback slipped slightly Monday with the U.S. on holiday.
Other data released last week showed U.S. oil production remaining at record highs of over 13 million barrels per day. Strong U.S. production is widely expected to plug any supply shortfalls arising from Middle East disruptions or output cuts by the Organization of Petroleum Exporting Countries.
(Ambar Warrick contributed to this item.)