Oil prices fell slightly in early Asian trade on Tuesday as traders awaited a slew of economic readings from major oil importers this week, while focus also remained on potential supply disruptions from Tropical Storm Idalia.
Crude prices moved little on Monday after closing lower for two consecutive weeks, with investors shying away from big bets ahead of key economic readings from the U.S. and China later this week.
A two-month rally in oil markets was seen winding down in mid-August, as renewed concerns over rising interest rates and slowing demand- particularly in China- spurred a heavy dose of profit taking.
But on the supply front, markets were awaiting any potential disruptions to oil production in the Gulf of Mexico, with Idalia set to make landfall in Florida this Wednesday. The storm is also expected to strengthen into a major hurricane.
Brent oil futures fell slightly to $83.78 a barrel, while West Texas Intermediate crude futures fell 0.1% to $80.00 a barrel by 20:56 ET (00:56 GMT).
US, Chinese economic readings on tap
Markets are now awaiting a slew of readings on the world’s largest economies this week, starting with U.S. consumer confidence later in the day.
A second reading on second-quarter gross domestic product growth is due on Wednesday, while readings on personal consumption expenditures (PCE) inflation- the Federal Reserve’s preferred inflation gauge- are due on Thursday.
Nonfarm payrolls data for August is expected on Friday, and along with the PCE reading, is expected to factor into the Fed’s plans for future rate hikes.
Hawkish signals from the Fed had boosted the dollar to near three-month highs in recent sessions and dented oil prices.
In China, purchasing managers’ index (PMI) data is due on Thursday and Friday, and is expected to shed more light on business activity in the world’s largest oil importer.
While some stimulus measures from the country helped lift sentiment over Chinese oil demand, markets remained wary of a broader decline in the economy, which is expected to dent its appetite for crude.
Storm Idalia seen potentially disrupting U.S. supplies
Idalia is expected to make landfall in Florida on Wednesday, causing extreme weather conditions along the Gulf of Mexico and potentially causing some production shutdowns in the oil-rich region.
The area accounts for roughly one-sixth of total oil production in the U.S., with any disruptions likely to cause near-term tightness in U.S. crude supply.
Such a scenario is likely to buoy oil prices, given that global supply is already set to tighten substantially this year following bumper production cuts by Saudi Arabia and Russia.