Investing.com– Oil prices fell in Asian trading on Monday, with markets remaining cautious ahead of the U.S. Federal Reserve’s policy meeting later in the week, while investors weighed a barrage of Chinese economic data for more clues on demand.
The February-delivery futures fell 0.3% to $74.28 a barrel, while the February futures fell 0.4% to $70.56 a barrel as of 8:35 p.m. ET (01:35 GMT).
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Both contracts cooled after posting big gains last week as U.S. officials raised the possibility of additional oil sanctions on Russia – a move that is expected to significantly tighten markets over the coming year.
However, oil remained under pressure from concerns over weak demand. Markets also remained cautious ahead of this week’s Fed meeting, at which the central bank is expected to cut rates by 25 basis points, while announcing a slowdown in the pace of cuts for 2025.
Chinese industrial production and retail sales in focus
Industrial production in China, the world’s top oil importer, was in line with expectations for November and was slightly above last year’s growth as the country’s stimulus measures supported economic activity, data showed Monday .
However, retail sales for November were significantly lower than expected as private spending remained weak.
Other data showed that China’s unemployment data remained unchanged at 5%.
The slowdown in China’s economy remains a major concern for oil traders. Markets witnessed weaker-than-expected demand growth in China, which has traditionally been a key driver of global oil consumption.
Last week, the International Energy Agency (IEA) noted that China’s oil demand has contracted, reinforcing fears of an oversupply in the coming year.
A major Chinese economic policy meeting also ended last week without giving major guidance on recovery plans.
Prices rose sharply last week on expectations of further stimulus measures from China’s Central Economic Work Conference (CEWC). However, updates from the meeting did not provide any indication of bold new steps by China to immediately revive its economy.
Markets assess risks of supply glut
Last week, the IEA maintained its forecast that the oil market would remain adequately supplied, despite a slight increase in demand forecast for next year.
Last week, the Organization of the Petroleum Exporting Countries (OPEC) lowered its oil demand growth forecasts for 2024 and 2025, for the fifth time in a row. The cartel also recently extended its series of supply cuts.
These factors have collectively strengthened bearish sentiment as oversupply risks coincide with weaker demand forecasts.
Oil nonetheless posted big gains last week as fears of falling demand were largely offset by the possibility of tighter oil markets in the face of tougher U.S. sanctions.
In addition to tightening restrictions on Russia, the United States could also take a tougher stance on Iran, especially as Tehran could lose its footing in Syria.
