Oil prices fell slightly on Tuesday after economic headwinds offset support provided by the United States' announcement of plans to hit Iran with new sanctions after the Middle Eastern country's weekend attack on Israel.
Brent crude futures for June delivery edged down 15 cents, or 0.17%, to $89.95 a barrel by 12:26 p.m. EDT (1626 GMT). U.S. crude for May fell 8 cents, or 0.09%, to $85.33.
Federal Reserve Vice Chair Philip Jefferson said the U.S. central bank was ready to keep its tight monetary policy in place if inflation fails to slow as expected.
"Rising interest rates are killing markets, as it appears the Fed is stuck in the mud, while the economy continues to inflate," said Tim Snyder, economist at Matador Economics.
Concerns that Iran would respond to the April 1 strike on its embassy compound in Damascus had sent Brent to $92.18 on Friday, its highest level since October. But prices retreated on Monday after Iran's attack on Israel over the weekend proved to be less damaging than anticipated, and economic challenges added further pressure.
U.S. Treasury Secretary Janet Yellen said the U.S. intends to hit Iran with new sanctions in coming days due to its unprecedented attack on Israel, and that these actions could seek to reduce Iran's capacity to export oil.
Israel's war cabinet was set to meet for the third time in three days on Tuesday, an official said, to decide on a response to Iran's attack, amid international pressure to avoid further escalating the conflict in the Middle East.
"However, any further developments regarding retaliation could raise the risk premium on oil, particularly given Iran's position as OPEC's third-largest producer," she added.
Iran produces more than 3 million barrels per day of crude oil as a major producer within the Organization of the Petroleum Exporting Countries.
Iran will respond to any action against its interests, President Ebrahim Raisi was reported as saying by the Iranian Student News Agency a day after Israel warned it will respond to Tehran's drone and missile attack.
"The balancing act between sticky inflation, a hesitant Fed and the gradual move towards a full-blown regional conflict keeps oil ... in its range," said Tamas Varga of oil broker PVM.
"Material disruption to oil production, supply or shipping must take place to approach the $100 a barrel milestone. Currently such a development appears implausible," he added.
Investors also await weekly U.S. oil stocks data from the American Petroleum Institute (API), expected for release later on Tuesday.
U.S. crude and distillates stockpiles were seen rising last week, while gasoline likely drew down, a preliminary Reuters poll showed on Monday.
Source Name : Economic Times