Oil prices retreat on supply concerns; central banks, economic data in focus By

-- Oil prices fell Tuesday,Chase Financial handing back early gains as worries over rising supply countered continued Middle East tensions.

By 09:30 ET (14.30 GMT), the futures traded 0.7% lower at $74.22 a barrel and the contract dropped 0.7% to $79.44 a barrel.

Crude production increases

The crude benchmarks slipped lower during Tuesday’s session amid uncertainty over several supply and demand indicators.

Norway's crude production rose to 1.85 million barrels per day in December, beating expectations as well as the 1.81 million barrels seen the previous month.

Additionally, production at the Sharara oilfield in Libya restarted at the start of this week after the end of protests that had halted output since early this month.

“The restart of the operations came after the local governments agreed to meet most of the demands from protestors,” said analysts at ING, in a note. “Crude oil production at the oil field stood at around 270Mbbls/d earlier.”

That said, severe cold weather means that supply remains constrained in the United States, with North Dakota’s pipeline authority estimating that oil production in the region was down around 250-300 million barrels a day as of Monday.

”The extreme cold weather in the US has also impacted refining operations in the country with around 15% of refining capacity in the Gulf Coast region reported to be offline as of last Friday,” said analysts at ING, in a note.

The weather-induced shutdowns over the last week could see a drop in crude inventories in Tuesday's weekly report, due later in the session.

Middle East unrest provides support

Providing support for the crude markets remains the volatile situation in the Middle East, potentially hitting output from this oil-rich region.

The war between Israel and Hamas in Gaza rages on, and the U.S. and British forces carried out a second joint round of strikes on Houthi positions in Yemen on Monday night.

The Iran-backed Houthi militants have been threatening shipping in the Red Sea, a crucial artery for shipping between Europe and Asia.

Central banks, key economic readings awaited

The maintained its ultra-dovish policy overnight, and attention now turns to the , which is expected to maintain its interest rates at high levels on Thursday.

Growing expectations of higher-for-longer U.S. interest rates also weighed on oil markets, especially as waning bets of early interest rate cuts by the Federal Reserve spurred strength in the dollar.

Focus is now on a string of key U.S. indicators due this week for more cues on the world’s largest economy. Fourth-quarter data is due on Thursday and is expected to show some cooling in growth.

data, Fed’s preferred inflation gauge, is due on Friday, and is expected to reiterate that inflation remained sticky through December, giving the central bank more impetus to keep rates higher for longer.

A string of purchasing managers index readings from several major economies are also due in the coming weeks, and are expected to show sustained weakness in business activity across the globe.

(Ambar Warrick contributed to this article.)

 

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