Oil prices fell on Tuesday after the US said it would release more crude from its Strategic Petroleum Reserve (SPR), even as concerns continue about sluggish demand due to slowing global economic growth.
Brent, the benchmark for two thirds of the world’s oil, was trading 1.28 per cent lower at $85.50 a barrel at 10.09pm UAE time.
West Texas Intermediate, the gauge that tracks US crude, was down 1.31 per cent at $79.09 a barrel.
The US Department of Energy said it would sell 26 million barrels of crude from its emergency reserve this year to “meet its obligation to Congress".
Bids on the oil are due on February 28 and it will be delivered from April 1 to June 30, the department said.
A record 180 million barrels of oil were released from America’s emergency reserves last year after Russia’s invasion of Ukraine resulted in Brent crude closing in on a 14-year high of $140 a barrel.
"Oil prices settled slightly higher overnight but have given up those gains in early trade today on plans from the US government to release more crude from strategic stockpiles," said Jeanne Walters, a senior economist at Emirates NBD.
"These sales had been planned as part of budgeting exercises from several years ago, rather than adding to the release of 180 million barrels last year aimed at stopping price growth."
Investors will also be keenly awaiting Tuesday’s US consumer price index data, a closely followed inflation gauge.
“If inflation is scorching hot, we could see a make-or-break moment in the dollar as more [US Federal Reserve] rate hikes get priced in,” said Edward Moya, senior market analyst at Oanda.
“The crude demand outlook is still holding on to hopes that the US economy could still have a soft landing, but a hot inflation report might trigger more recession calls.”
This month, the Fed raised interest rates — for the eighth time since last year — by 25 basis points, and indicated that more increases were to come.
The latest announcement puts the Fed's target range at between 4.5 per cent and 4.75 per cent — about 50 basis points away from its end-of-year projection of 5.1 per cent.
The International Monetary Fund expects central banks to continue monetary tightening to keep inflation in check, the fund’s managing director Kristalina Georgieva said at an event on Monday.
“Inflation is trimming down [but] the fight is not won yet,” said Ms Georgieva.
Crude futures gained more than 8 per cent last week amid China's recovery prospects and supply concerns triggered by Russia's plans to slash output by 500,000 barrels per day.
Russia said it would cut about 5 per cent of its production in March after the West imposed a price cap on exports of its refined products.
On February 5, the G7 and the EU agreed to set the price cap at $100 a barrel for products that trade at a premium to crude, such as diesel, and $45 a barrel for products that trade at a discount, such as naphtha and fuel oil.
The price cap was introduced along with an EU ban on Russian diesel and other refined products.
