Oil prices fell in Asian trade on Monday, wiping out some of the gains of the previous session amid worries lower growth targets in China could cut oil demand and ongoing concern over Russia`s compliance with a global deal to cut oil output, according to Reuters.
But worries over escalating violence in the Middle East put a floor under prices, as reported by Reuters.
Brent crude futures dropped 47 cents, or 0.8 percent, to $55.43 a barrel as of 07:49 GMT after settling 1.5 percent higher in the previous session.
U.S. West Texas Intermediate (WTI) crude futures fell 47 cents, or 0.9 percent, to $52.86 a barrel after closing the previous session up 1.4 percent.
”The main drag affecting markets today is the lowering of growth targets by China and tighter regulatory controls which implies less demand for oil and commodities in general,” said Jeffrey Halley, senior market strategist at Oanda brokerage in Singapore.
China aims to expand its economy by around 6.5 percent this year, Premier Li Keqiang said in his work report at the opening of the annual meeting of parliament on Sunday.
That is lower than the 6.7 percent growth achieved last year.
China also plans to cut steel and coal output this year in an effort to tackle pollution, its top economic planner said on Sunday, while China`s newly appointed banking regulator vowed on to strengthen supervision of the lending sector.
Meanwhile, figures by Russia`s energy ministry released last week showed February oil output was unchanged from January at 11.11 million barrels per day (bpd), casting doubt on Russia`s moves to rein in output as part of a pact with oil producers last year.
Despite uncertainty over output cuts, crude inventories among OECD members would normalize slightly faster than expected this year due to larger-than-expected production cuts this year and higher demand in 2016, Goldman Sachs said on Monday.
Oil prices rose on Friday as the dollar weakened modestly after a speech by U.S. Federal Reserve Chair Janet Yellen suggested a rate increase would come at the end of a two-day Fed meeting on March 15.
A weaker dollar bolsters commodity prices, including oil. While a rate hike would be supportive for the U.S. dollar, analysts said a near-term hike was already largely priced in.
Crude oil prices were also supported by news of increasing supply disruptions in the Middle East, ANZ said in a note on Monday.
That followed new doubts over Libya`s attempts to revive its oil production after an armed faction entered two major oil ports on Friday, pushing back forces that captured and reopened the terminals in September.
”I`m surprised prices haven`t moved higher given events in the Middle East over the weekend. China and U.S. interest rates are the bigger issues,” Halley added.