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Brent crude futures fell $1.91, or 2.5%, to $72.88 a barrel by
0902 GMT. U.S. West Texas Intermediate (WTI) crude was at
$68.15, down $2.02 or 2.8%.
Both benchmarks posted their second straight weekly declines
last week as disappointing Chinese economic data raised concerns
about demand growth in the world's largest crude importer,
offsetting a boost in prices from Saudi Arabia pledging to cut
production by 1 million barrels per day (bpd) in July.
"Oil prices are caught in a clash between two opposing forces,
bearish asset allocators who point to monetary contraction and
bullish oil speculators expecting lower inventories in 2H23,"
Bank of America Global Research's Francisco Blanch said in a
note.
"The bearish allocators will maintain the upper hand for now, as
oil prices struggle to rally until the Fed eases money supply,"
Blanch said. The bank still expects Brent crude to average about
$80 a barrel in 2023.
The Fed's rate hikes have strengthened the greenback, making
dollar-denominated commodities more expensive for holders of
other currencies and weighing on prices.
Most market participants expect the U.S. central bank to leave
interest rates unchanged when it concludes its two-day monetary
policy meeting on Wednesday.
On the supply side, while Saudi Arabia has cut oil production
four times in the past year, Russian supply has held up as
sanctions were engineered in a way to have less of an impact on
output, Blanch said.
Russian oil exports to China and India have grown despite the
implementation of the European Union's embargo and the Group of
Seven's price cap mechanism that started in early December.
Goldman Sachs cut its oil price forecasts on
higher-than-expected supplies from Russia and Iran and raised
2024 supply forecasts for the two producers and Venezuela by a
total 800,000 bpd.
The bank's December crude price forecast now stands at $86 a
barrel for Brent, down from $95, and at $81 a barrel for WTI,
down from $89.
(Additional reporting by Florence Tan and Mohi Narayan; Editing
by Tom Hogue, Sonali Paul, Kim Coghill and Emelia
Sithole-Matarise)
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