Oil prices fell in early Asian trading on Monday, extending losses from the previous session after oil ended the week 2-3% lower amid market concerns that higher-than-expected inflation could delay U.S. interest rate cuts.
Brent crude futures fell 34 cents to $81.28 a barrel by 0121 GMT, while U.S. West Texas Intermediate crude futures (WTI) declined 33 cents to $76.16 a barrel.
"Crude oil prices declined for want of fresh drivers," ANZ analysts wrote in a note. "Oil has been caught between bullish factors such as lower OPEC output and elevated geopolitical risks and bearish concerns about weak demand in China."
While Iran-aligned Houthis have continued their attacks on shipping in the Red Sea, the Israel-Hamas war has not significantly constrained oil supply.
White House national security adviser Jake Sullivan told CNN on Sunday that negotiators for the United States, Egypt, Qatar and Israel had agreed on the basic contours of a hostage deal during talks in Paris but are still in negotiations. Israeli Prime Minister Benjamin Netanyahu said it was not clear yet whether a deal would materialise.
The morning dip built on losses last week, when Brent declined about 2% and WTI fell more than 3% on indications that U.S. interest rate cuts could be delayed by two months due to an uptick in inflation.
The ANZ analysts anticipated oil stockpiles could start to fall in the coming weeks as refineries return from maintenance, which could offer some support to prices.
The U.S. Energy Information Administration said last week that crude inventories had risen by 3.5 million barrels to 442.9 million barrels in the week ending Feb. 16. That compared with analysts' expectations in a Reuters poll for a 3.9 million-barrel rise.
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