By Colleen Howe
BEIJING (Reuters) – Oil prices fell in early trading in Asia on Monday, reversing gains on Friday as U.S. inflation data further dampened prospects for an upcoming interest rate cut and boosted the dollar, which hurts demand for oil.
Brent crude futures fell 75 cents, or 0.84%, to $88.75 a barrel, while West Texas Intermediate (WTI) futures were down 65 cents, or 0 .78%, to $83.20 per barrel at 12:21 GMT.
“Persistent inflation in the United States raises concerns about ‘higher and longer-lasting’ interest rates, which would lead to a strengthening of the US dollar and put pressure on commodity prices, said l independent market analyst Tina Teng.
US inflation rose 2.7% in the 12 months through March, data showed on Friday, above the US Federal Reserve’s 2% target. Lower inflation would have increased the likelihood of interest rate cuts, which would boost economic growth and oil demand.
The dollar has strengthened on the prospect of higher and more sustainable interest rates. A stronger dollar makes oil more expensive for those who hold other currencies.
But oil prices could rise again if data on U.S. inventories and China’s PMI improve this week, Teng said.
Brent was up 49 cents and WTI 28 cents on Friday on concerns about supply disruptions due to events in the Middle East.
The market discounted potential supply disruptions resulting from Ukrainian drone strikes on oil refineries in Ilsky and Slavyansk, in Russia’s Krasnodar region, over the weekend. The Slavyansk refinery had to suspend some operations after the attack, a plant official said.
(Reporting by Colleen Howe; Editing by Sonali Paul)
