Oil extends decline on signs of weak fuel demand, strong dollar

Oil prices extended declines on Monday amid signs of weak fuel demand and as comments from U.S. Federal Reserve officials dampened hopes of interest rate cuts, which could slow growth and crimp fuel demand in the world's biggest economy.

Brent crude futures slid 26 cents, or 0.3 per cent, to $82.53 a barrel by 0025 GMT while U.S. West Texas Intermediate crude futures was at $78.03 a barrel, down 23 cents, or 0.3 per cent.

Both benchmarks settled about $1 lower on Friday as Fed officials debated whether U.S. interest rates are high enough to bring inflation back to 2 per cent.

Analysts expect the U.S. central bank to keep its policy rate at the current level for longer, supporting the dollar. A strong greenback makes dollar-denominated oil more expensive for investors holding other currencies.

Oil prices also fell amid signs of weak demand, ANZ analysts said in a note, as U.S. gasoline and distillate inventories rose in the week of ahead of the start of the U.S. driving season.

Refiners globally are struggling with slumping profits for diesel as new refineries boost supplies and as mild weather in the northern hemisphere and slow economic activity eat into demand.

Still, the market remained supported by expectations that the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, could extend supply cuts into the second half of the year.

Iraq, the second-largest OPEC producer, is committed to voluntary oil production cuts agreed by OPEC and is keen to cooperate with member countries on efforts to achieve more stability in global oil markets, its oil minister told the state news agency on Sunday.

The minister's comments followed his suggestion on Saturday that Iraq had made enough voluntary reductions and would not agree to any additional cuts proposed by the wider OPEC+ producer group at its meeting in early June.

Earlier this month, OPEC+ called out Iraq for pumping over its output quota by a cumulative 602,000 barrels per day in the first three months of 2024. The group said that Baghdad had agreed to compensate with additional production cuts over the rest of the year.