SINGAPORE Oil prices fell on Monday, giving up earlier gains, as global producers this week will likely keep output unchanged during a meeting this week and investors are cautious ahead of a U.S. Federal Reserve meeting that may spur market volatility.
Brent crude futures fell by 20 cents, or 0.2 per cent, to $86.46 a barrel by 0435 GMT, while U.S. West Texas Intermediate crude fell 11 cents, or 0.1 per cent, to $79.57 a barrel.
Ministers from the Organisation of the Petroleum Exporting Countries OPEC and allies, including Russia, are unlikely to change their current oil output policy when they meet virtually on February 1.
An indication of a rise in crude exports from Russia's Baltic ports in early February caused Brent and WTI to post their first weekly loss in three weeks.
National Australia Bank analysts believe that outlook commentary from the U.S. Fed will be the driving force behind the outlook in the near term, despite the fact that no change to the OPEC output is expected to be announced at this week's meeting.
Oil prices rose earlier in the day amid tensions in the Middle East following a drone attack in Iran and as China, the world's biggest crude importer, pledged over the weekend to promote a consumption recovery that would support fuel demand.
Stefano Grasso, senior portfolio manager at 8 VantEdge in Singapore said it was not really clear what is happening in Iran, but any escalation there is the potential to disrupt crude flow.
We have Russia on the supply side and China on the demand side. Both can swing by more than 1 million barrels per day, above or below expectations, said Grasso, formerly an oil trader with Italy's Eni.
China surprised the market in terms of how fast they are coming out of zero COVID, while Russia surprised in terms of resilience of export volume despite the sanctions. After its Lunar New Year holidays, China resumes business this week. In the past two years, the number of passengers travelling before the holidays rose above levels but is still below 2019, according to a note from the Ministry of Transport.
The Citi note said that the international traffic recovery remains gradual and there is a high-single to low-teens digits to 2019 level, and that we expect further recovery when outbound tour group travel resumes on February 6.