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By Scott DiSavino
NEW YORK (Reuters) - Oil prices fell about 2% to a two-month low on Tuesday on weak economic news from the U.S. and Germany that fed fears of slower energy demand, along with signs from several countries that oil output was on track to increase.
Brent futures fell $1.76, or 2.4%, to settle at $73.02 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $1.77, or 2.5%, to settle at $68.93.
That was the lowest close for Brent since December 23 and WTI since December 10.
U.S. data showed consumer confidence in February deteriorated at its sharpest pace in 3-1/2 years, with 12-month inflation expectations surging.
Analysts said President Donald Trump's stated plans for higher tariffs have raised inflation worries at the U.S. Federal Reserve. This could lead the Fed to keep interest rates higher, which in turn could slow economic growth and energy demand.
Trump said tariffs against Canadian and Mexican imports, scheduled to start on March 4, are "on time and on schedule," which may boost oil prices by reducing supplies from both countries.
But "tariffs are increasingly being viewed as a negative influence on global economic growth that could force additional downside revisions in world oil demand," analysts at energy advisory firm Ritterbusch and Associates said.Data showed the German economy shrank by 0.2% in the final quarter of 2024 from the previous quarter. German election winner Friedrich Merz ruled out a quick reform to state borrowing limits known as the "debt brake," which some investors have urged to boost the economy.
OIL OUTPUT COULD RISE
Also weighing on oil prices was the possibility of a peace deal between Russia and Ukraine that "foreshadows the lifting of Russian sanctions, potentially welcoming unfettered Russian supply back to the market," said Tamas Varga at oil broker PVM.
Russia is the third-biggest oil producer behind the U.S. and Saudi Arabia and a member of OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allied countries.
In Iraq, the second-largest OPEC producer, oil major BP signed a deal to redevelop four Kirkuk oil and gas fields. Iraq is also waiting for Turkey's approval soon to restart oil flows from the Iraqi Kurdistan region.
In Nigeria, another OPEC member, oil production rose to 1.8 million bpd, up from just 1 million bpd over a year ago.
In the U.S., Trump said he wanted the Keystone XL pipeline built and pledged easy regulatory approvals for the project that would move crude from Canada to the U.S.
U.S. OIL INVENTORIES
U.S. oil inventory data from the American Petroleum Institute (API) trade group is due on Tuesday and U.S. Energy Information Administration data is due on Wednesday. [EIA/S] [API/S]
Analysts forecast energy firms added about 2.6 million barrels of oil to U.S. stockpiles during the week ended February 21.
If correct, that would be the first time energy firms added oil into storage for five weeks in a row since March 2024. That compares with an increase of 4.2 million barrels during the same week last year and an average build of 2.3 million barrels over the past five years (2020-2024).
(Reporting by Scott DiSavino, Paul Carsten and Colleen Howe; Editing by Kevin Liffey, David Evans, Christina Fincher, David Gregorio and Nia Williams)
