Oil futures slipped from the highest levels in several weeks on Monday on weakness in consumer spending in China, which is the world's largest oil importer, and as investors paused buying ahead of the U.S. Federal Reserve's interest rate decision.
Brent crude futures fell 39 cents to $74.10 a barrel by 1:10 p.m EST, after settling on Friday at their highest since Nov. 22.
U.S. West Texas Intermediate crude shed 35 cents to $70.94 after registering its highest close since Nov. 7 in the previous session.
Last week, oil benefited from the expectation that supply would tighten with additional sanctions on crude producers Russia and Iran, while possible lower interest rates in the U.S. and Europe would spur demand.
"We feel that last week’s events have been appropriately priced and that this week will be bringing fewer items capable of supporting oil prices," said Jim Ritterbusch of consultancy Ritterbusch and Associates in Florida.
Chinese retail sales were slower than expected, keeping pressure on Beijing to ramp up stimulus for a fragile economy facing U.S. trade tariffs under a second Trump administration.
"China has historically been the global demand engine," said Bob Yawger, director of energy futures at Mizuho in New York. "However, the rate of demand growth has slowed dramatically in the past year as the economy has slowed and EV sales have increased."
The Chinese outlook contributed the decision by oil producer group OPEC+ to postpone plans for higher output until April.
"Whatever stimulus is being deployed, consumers are not buying into it; and without a serious sea-change in personal spending behaviour, China's economic fortunes will be stunted," said John Evans at oil broker PVM.
Traders also took profits while awaiting the U.S. Central Bank's decision on interest rates this week.
IG market analyst Tony Sycamore said that light profit-taking was to be expected after prices jumped more than 6% last week.
He noted that many banks and funds are likely to have closed their books given reduced appetite for positions during the holiday season.
The Fed is expected to cut interest rates by a quarter of a percentage point at its Dec. 17-18 meeting, which will also provide an updated look at how much further Fed officials think they will reduce rates in 2025 and perhaps into 2026.
Lower interest rates can stimulate economic growth and increase oil demand.
Oil prices were further pressured by the U.S. dollar, which briefly hovered close to a three-week high versus other major currencies, ahead of the week of central bank meetings.
The U.S. dollar and commodities like crude oil tend to trade inversely.
Investors were also looking to U.S. oil inventory reports coming up this week for guidance.
U.S. crude oil and distillate inventories were expected to have fallen last week, while gasoline stocks likely rose, a preliminary Reuters poll showed ahead of a report from the American Petroleum Institute at 4:30 p.m. EST (2130 GMT) on Tuesday and one from the Energy Information Administration at 10:30 a.m. EST (1530 GMT) on Wednesday
Four analysts polled by Reuters estimated on average that crude inventories fell by about 1.9 million barrels in the week to Dec. 13.
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