By Florence Tan

SINGAPORE (Reuters) -Oil prices extended declines on Monday amid signs of weak fuel demand and as comments from U.S. Federal Reserve officials dampened hopes of interest rate cuts, which could slow growth and crimp energy use in the world’s biggest economy.

futures slid 7 cents, or 0.1%, to $82.72 a barrel by 0624 GMT, while U.S. West Texas Intermediate crude futures were at $78.21 a barrel, down 5 cents.

“Oil markets shrugged off the impact of the Middle East conflicts and shifted (their) attention to the world economic outlook again,” Auckland-based independent analyst Tina Teng said.

China’s producer price index (PPI) contracted in April, suggesting that business demand remained sluggish, she said, adding that recent U.S. economic data signalled a slowdown as well.

Both benchmarks settled about $1 lower on Friday as Fed officials debated whether U.S. interest rates are high enough to bring inflation back to 2%, offsetting gains earlier last week over concerns of supply disruptions from the Israel-Gaza conflict.

Analysts expect the U.S. central bank to keep its policy rate at the current level for longer, supporting the dollar. A stronger greenback makes dollar-denominated oil more expensive for investors holding other currencies.

Oil prices also fell amid signs of weak demand, ANZ analysts said in a note, as U.S. gasoline and distillate inventories rose in the week ahead of the start of the U.S. driving season.

Refiners globally are struggling with slumping profits for diesel as new refineries boost supplies and as mild weather in the northern hemisphere and slow economic activity eat into demand.

Still, the market remained supported by expectations that the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, could extend supply cuts into the second half of the year.

Iraq, the second-largest OPEC producer, is committed to voluntary oil production cuts agreed by OPEC and is keen to cooperate with member countries on efforts to achieve more stability in global oil markets, its oil minister told the state news agency on Sunday.

The minister’s comments followed his suggestion on Saturday that Iraq had made enough voluntary reductions and would not agree to any additional cuts proposed by the wider OPEC+ producer group at its meeting in early June.

Earlier this month, OPEC+ called out Iraq for pumping over its output quota by a cumulative 602,000 barrels per day in the first three months of 2024. The group said that Baghdad had agreed to compensate with additional production cuts over the rest of the year.

“Iraq has fallen short of its additional voluntary cuts since the beginning of the year and so the willingness and ability for Iraq to cut more is likely limited,” ING analysts said in a note.

“There will likely be increased noise in the lead-up to the next Joint Ministerial Monitoring Committee (JMMC) meeting scheduled for 1 June.”

In the U.S., the oil rig count fell by three to 496 last week, their lowest since November, Baker Hughes said in its weekly report on Friday.

Investing.com– Oil prices rose Monday, rebounding from the previous week’s mild losses as traders digested mixed Chinese inflation data ahead of key U.S. inflation readings this week. 

AT 08:15 ET (12:15 GMT),  climbed 0.7% to $83.33 a barrel, while gained 0.8% to $78.85 a barrel. 

Chinese inflation data offers mixed cues 

Chinese inflation data for April, released over the weekend, showed a sustained recovery in inflation, offering hope that substantial monetary support from Beijing appeared to be supporting spending.

But Chinese inflation shrank for a 19th consecutive month, signaling that factory and business activity in the world’s biggest crude importer remained weak.

China’s oil imports in April had fallen from the prior month, albeit slightly. They were also largely flat from the same period last year, as the country grapples with a sluggish post-COVID economic recovery. 

Alberta wildfire could cut output 

Helping the tone Monday was the news of an evacuation alert for Fort McMurray, Alberta, as an out-of-control fire rages southwest of the major Canadian oil town, making it among the first actions ahead of the wildfire season.

In 2016, a huge wildfire in Fort McMurray forced the evacuation of 90,000 residents and shut in more than a million barrels per day of oil output.

Global supply will remain an issue ahead of June’s meeting of the Organization of Petroleum Exporting Countries, and allies, a group of major producers known as OPEC+.

Goldman Sachs said last week, in a note, that it no longer expects OPEC+ to partially reverse recent voluntary production cuts next month, expecting Saudi Arabia’s crude oil supply to remain steady at 9 million barrels per day in July, compared to their earlier estimate of 9.2 million barrels per day.

However, there were reports over the weekend that Iraq’s oil minister said that the country would not agree to further supply cuts, and it is not clear whether this refers to a rollover of existing cuts or deeper cuts.  

US CPI inflation data on tap 

Crude prices were nursing mild losses from the prior week after weak readings on U.S. consumer confidence and high inflation projections spurred concerns over an economic cooldown in the world’s biggest fuel consumer. 

The readings were also preceded by data showing a build in U.S. gasoline and distillate inventories.  

That said, oil markets were also on edge ahead of key U.S. inflation readings this week. 

data for April is due on Tuesday, while the more closely-watched reading is due on Wednesday.

The focus will be largely on any signs of cooling U.S. inflation, which could in turn give the Federal Reserve more impetus to cut interest rates.

The prospect of U.S. rates remaining at elevated levels for a lengthy period has been a major weight on oil prices in recent months, given that high rates are expected to subdue economic activity and chip away at oil demand. 

(Ambar Warrick contributed to this article.)

By Moayed Kenany, Timour Azhari and Adam Makary

BAGHDAD (Reuters) -Chinese companies won bids to explore five Iraqi oil and gas fields on Saturday in a licensing round for hydrocarbon exploration that was primarily aimed at ramping up gas production for domestic use.

An Iraqi Kurdish company also took two of the 29 projects up for grabs in the three-day licensing round across central, southern and western Iraq, which for the first time includes an offshore exploration block in the country’s Arab Gulf waters.

Iraq aims to lure billions of dollars of investments to develop its oil and gas sector as it looks to ramp up local petrochemicals production and end imports of gas from neighbouring Iran that are currently key to producing power.

More than 20 companies pre-qualified for the licensing round, including European, Chinese, Arab and Iraqi groups.

There were notably no U.S. oil majors involved, even after Iraqi Prime Minister Mohammed Shia met with representatives of U.S. oil firms during an official visit to the United States last month.

Five bids were won on Saturday by Chinese companies.

Zhongman Petroleum and Natural Gas Group (ZPEC) took the northern extension of the Eastern Baghdad field, in Baghdad, and the Middle Euphrates field that straddles the southern Najaf and Karbala provinces, the oil ministry said.

China’s United Energy Group Ltd won a bid to develop the Al-Faw field in southern Basra, while ZhenHua won a bid to develop Iraq’s Qurnain field in the Iraqi-Saudi border region and Geo-Jade won a bid to develop Iraq’s Zurbatiya field in the Wasit.

Two oil and gas fields were taken by Iraq’s KAR Group – the Dimah field in eastern Maysan province, and the Sasan & Alan fields in Iraq’s northwestern Nineveh province – the ministry said.

Around 20 more projects are open for bidding on Sunday and Monday.

Falah Al-amri, the Iraqi prime minister’s advisor for oil and gas issues, said the government hoped the new projects would raise oil production to 6 million barrels per day by 2030 from around 5 million now.

The government also wants the projects to produce enough so that, along with plans to all-but eliminate gas flaring by 2030, Iraq could end imports.

“Its too early to talk about (gas) exports. We want to get self-sufficient,” Al-amri told Reuters.

Iraq, OPEC’s second-largest oil producer after Saudi Arabia, at one time had targeted becoming a rival to the Gulf Arab kingdom with output of over a tenth of global demand.

But its oil sector development has been hampered by contract terms viewed as unfavourable by many major oil companies as well as recurring conflict and political paralysis.

Growing investor focus in recent years on environmental, social and governance criteria have also had an effect.

Western oil giants such as Exxon Mobil Corp (NYSE:) and Royal Dutch Shell (LON:) Plc have departed from a number of projects in Iraq while Chinese companies have steadily expanded their footprint.