© Reuters. FILE PHOTO: OPEC logo is seen in this illustration taken, October 8, 2023. REUTERS/Dado Ruvic//File Photo

By Alex Lawler

LONDON (Reuters) – Oil slipped on Tuesday, giving up earlier gains, as concern over excess supply and slowing demand growth outweighed escalating supply risks in the Middle East after an attack by the Iran-aligned Houthis on a tanker.

A cruise missile launched from Houthi-controlled Yemen struck a commercial chemical tanker, causing a fire and damage but no casualties in the latest such attack to heighten safety risks for tankers in vital shipping lanes.

futures for February fell 32 cents, or 0.4%, to $75.71 per barrel by 1105 GMT, while U.S. West Texas Intermediate crude futures for January delivery slipped 19 cents, or 0.3%, to $71.13.

Although the attack on the vessel helped oil to rally earlier, “sentiment remains negative”, said Tamas Varga of broker PVM. “There is no help coming from the demand side of the oil equation. The fundamental backdrop is discouraging.”

Global oil demand growth is set to slow in 2024 with OPEC and the International Energy Agency split on the extent, and a recent OPEC+ deal to limit supply underwhelmed the market. OPEC and the IEA both update their forecasts this week.

Investors were also cautious ahead of a crucial U.S. inflation report and interest rate decision. The Consumer Price Index (CPI) report is due out on Tuesday, while the Federal Open Markets Committee’s two-day policy meeting ends on Wednesday.

“All attention will be on the U.S. CPI data today to potentially set the tone for U.S. policymakers at their upcoming meeting,” Yeap Jun Rong, market analyst at IG, said in a note.

Also in focus are talks at the COP28 climate summit, where negotiators are awaiting a new draft deal after many countries criticised a previous version as too weak because it omitted a “phase-out” of fossil fuels.

And coming into view are the latest U.S. inventory reports, which are expected to show a 1.5 million-barrel drop in crude stocks. The first report is at 2130 GMT from the American Petroleum Institute.