Investing.com-- Oil prices inched lower in Asian trade on Monday as markets remained cautious ahead of the U.S. Federal Reserve’s policy meeting later this week, while investors assessed a barrage of Chinese economic data for more cues on demand.
Brent Oil Futures expiring in February fell 0.3% to $74.28 a barrel, while Crude Oil WTI Futures fell 0.4% to $70.56 a barrel by 20:35 ET (01:35 GMT).
Both contracts cooled after clocking stellar gains last week, as U.S. officials outlined the possibility of more oil sanctions against Russia- a move that stands to substantially tighten markets in the coming year.
But oil still remained under pressure from concerns over sluggish demand. Markets were also largely cautious before a Fed meeting this week, where the central bank is widely expected to trim rates by 25 basis points but also flag a slower pace of cuts for 2025.
China industrial production, retail sales in focus
World's largest oil importer China's industrial production was in line with expectations for November, and was slightly higher compared to last year's growth, as the country's stimulus measures supported business activity, data on Monday showed.
However, retail sales for November were sharply lower than expectations as private spending remained weak.
Other data showed China’s Unemployment data remained unchanged at 5%.
China’s slowing economy remains a critical concern for oil traders. Markets have witnessed weaker-than-expected demand growth in China, traditionally a key driver for global oil consumption.
Last week, the International Energy Agency (IEA) noted that China's oil demand has been contracting, further underscoring fears of oversupply in the coming year.
A key Chinese economic policy meeting also concluded last week without offering any major cues on stimulus plans.
Prices had gained sharply last week around expectations of more stimulus measures from China’s Central Economic Work Conference (CEWC). However, the updates from the meeting failed to provide cues for bold new measures by China to immediately boost its economy.
Markets weigh oversupply risks
The IEA had last week maintained its projection that the oil market will remain adequately supplied, despite a slight rise in its demand forecast for next year.
The Organization of the Petroleum Exporting Countries, known as OPEC, had lowered its forecasts for oil demand growth in 2024 and 2025, last week, its fifth consecutive cut. The cartel had also recently extended its run of supply cuts.
These factors collectively heightened bearish sentiment, as oversupply risks coincide with softer demand expectations.
But oil still clocked strong gains last week, as fears of softer demand were largely offset by the potential for tighter oil markets in the face of stricter U.S. sanctions.
In addition to tighter curbs on Russia, the U.S. could also adopt a more hawkish stance against Iran, especially as Tehran was seen potentially losing a foothold in Syria.