Oil prices edged lower in Asian trading on Tuesday as markets grappled with the potential impacts of Iranian President Ebrahim Raisi's death on oil supplies, and traders worried that high U.S. interest rates could dampen demand this year.
President Raisi, who was seen as a successor to Supreme Leader Ayatollah Ali Khamenei, died in a helicopter crash over the weekend. However, the implications of his death for the oil-producing nation remain unclear, especially as the likelihood of a war with Israel seems reduced.
Brent oil futures for July delivery fell 0.4% to $83.38 a barrel, while West Texas Intermediate crude futures dropped 0.4% to $78.95 a barrel by 22:22 ET (02:22 GMT). Concerns about the health of Saudi King Salman also added to market uncertainty.
US Rate Fears Cloud Demand Outlook
Fears of prolonged high U.S. interest rates pressured crude markets, as several Federal Reserve officials warned of persistent inflation. High rates are expected to reduce demand and limit funds available for investment and economic growth, both of which support oil demand.
The minutes of the Fed’s late-April meeting, due on Wednesday, are expected to provide further insight into the rate outlook. Additionally, more Fed officials, particularly those on the rate-setting committee, are scheduled to speak in the coming days.
Last week, the International Energy Agency reduced its crude demand forecast for this year, citing concerns over weaker economic conditions due to high interest rates. However, the Organization of Petroleum Exporting Countries (OPEC) maintained its demand forecast, highlighting strength in top exporter China. Recent stimulus measures rolled out by Beijing have bolstered confidence in Chinese oil demand.
Awaiting More Cues from OPEC Meeting
Oil markets are also looking ahead to an OPEC meeting in June for further signals on production levels. The cartel is expected to potentially extend its current production cuts beyond their initial June-end deadline.
