By Shariq Khan
NEW YORK (Reuters) -Oil prices edged lower on Tuesday, with the U.S. benchmark down over 1%, as cooling expectations of interest rate cuts pushed the dollar to a one-month high and weather forecasters predicted a warmer-than-normal January.
U.S. West Texas Intermediate (WTI) crude futures fell 65 cents, or 0.9%, from Friday’s settlement to $72.03 a barrel by 1:02 p.m. ET (1802 GMT). U.S. markets were closed for a public holiday on Monday.
Global benchmark Brent Crude futures fell 24 cents, or 0.3%, from Monday’s settlement to $77.91 a barrel. At the session high, Brent futures were up by a dollar a barrel.
Weighing on oil prices, the U.S. dollar hit a one-month high on Tuesday as investors dialed back expectations of an interest rate cut by the Federal Reserve in March. As the main currency oil is traded in, a stronger greenback dents demand from investors holding other currencies.
Forecasts for warm weather later in January in the major U.S. production hubs also weighed on energy prices, said Jay Hatfield, portfolio manager at InfraCap in New York.
Meteorologists projected weather in the U.S. Lower 48 states would switch from colder than normal this week to mostly warmer than normal from Jan. 22-31.
Oil price losses were capped by signs of escalating tensions in the Middle East, where the U.S. military on Tuesday carried out a new strike in Yemen against four Houthi anti-ship ballistic missiles. Houthi attacks on Red Sea shipping have been disrupting global movement of goods through the key trading route.
Concerns of the conflict spreading throughout the region also grew on Tuesday, as Iran’s striking of targets in the semi-autonomous Kurdistan region of Iraq triggered a diplomatic dispute. Iran also attacked Islamic State positions in Syria.
“Tensions in the Middle East are rising so the geopolitical risk premium in oil prices should be rising as well,” said Rob Thummel, managing director at energy investment firm Tortoise Capital.
(Reporting by Shariq Khan, Robert Harvey, Arathy Somasekhar and Trixie Yap; editing by Barbara Lewis, Jason Neely, Paul Simao and David Gregorio)
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