Oil prices dropped in early Asian trading on Monday, responding to fears of a global economic slowdown and the likelihood of the Federal Reserve (the U.S. central bank) raising interest rates, tempered by expectations of supply cuts due to reductions announced by the "OPEC+" group.
Brent crude futures fell by 20 cents, or 0.3 percent, to $75.21 per barrel at 00:44 GMT, after settling up 0.8 percent on Friday. Meanwhile, U.S. West Texas Intermediate crude decreased by 23 cents, or 0.3 percent, to $70.41 after closing up 1.1 percent in the previous session.
Brent experienced a decline for the fourth consecutive quarter by the end of June, while West Texas Intermediate recorded a second quarterly drop as the two largest economies, the United States and China, slowed in the second quarter.
Concerns grew about further slowing that could damage fuel demand after data released on Friday showed that inflation in the U.S. remains above the central bank's 2 percent target, raising expectations that interest rates may rise again.
Analysts at the National Australia Bank noted that "hawkish comments regarding interest rates continue to raise concerns about demand forecasts affecting prices."
Higher interest rates could strengthen the U.S. dollar, making commodities more expensive for holders of other currencies, while also reducing demand for oil.
Some analysts expect supply cuts and rising prices in the second half of the year after Saudi Arabia, the world's largest oil exporter, pledged to cut production by about one million barrels per day in July, while the U.S. is gradually replenishing its strategic oil reserves.
A Reuters survey indicated that OPEC's oil production only slightly declined in June, as increases from producers in Iraq and Nigeria limited the impact of cuts from other producers.
