Oil prices fall in light trading as US prepares for Presidents' Day

Oil prices edge down following U.S. Federal Reserve comments and Middle East tensions, with uncertainty in demand and market surplus forecasted.

Oil prices experienced a slight decrease on Monday morning as a result of comments from U.S. Federal Reserve officials indicating a more patient approach to potential interest rate cuts. Brent crude futures saw a decrease of 58 cents, or 0.69%, bringing the price to $82.89 a barrel, while U.S. West Texas Intermediate crude was 35 cents, or 0.44%, lower at $78.84 at 0138 GMT. The markets are awaiting the return of demand from China after the week-long Lunar New Year holiday, and Presidents' Day in the United States is expected to result in relatively muted trade.

The Federal Reserve's signal of "patience" toward interest rate cuts comes after a week of disappointing U.S. economic data, which showed rising prices and falling retail sales and factory production. This has led to higher rates, increasing the cost of purchasing oil and contributing to a bearish market trend.

Tensions in the Middle East continued over the weekend, with Israeli raids causing the Gaza Strip's second-largest hospital to go out of service, and Yemen's Iran-aligned Houthi fighters claiming responsibility for an attack on an India-bound oil tanker.

The Organization of the Petroleum Exporting Countries (OPEC) has the capacity to cover "most levels of disruption", according to ANZ Research analysts. OPEC's spare capacity is at an eight-year high of 6.4 million barrels of oil per day. Additionally, the International Energy Agency warned that growth in demand is expected to lose momentum in 2024, forecasting a market surplus during the year.

The United Nations Security Council is expected to vote on an Algerian proposal for an immediate humanitarian ceasefire in the Israel-Hamas conflict, with the United States indicating it would veto. In Europe, Russia announced its full control of the Ukrainian town of Avdiivka, marking its biggest gain in nine months, just days ahead of the two-year anniversary of its invasion.

The death of Alexei Navalny, President Vladimir Putin's most high-profile opponent, in a Russian Arctic penal colony on Friday has raised questions about whether it will trigger new sanctions on Moscow, which is the world's second-biggest oil exporter.