Oil prices fall on fear of high US interest rates depressing demand

Both benchmarks fell less than 1% on Monday as officials said they were awaiting more signs of slowing inflation before considering interest rate cuts.

"Fears of weaker demand led to selling as the prospect of became more distant," said analyst Toshitaka Tazawa at .

Fed Vice Chair Philip Jefferson said on Monday it was too early to tell if the inflation slowdown is "long lasting," while Vice Chair Michael Barr said restrictive policy needs more time. Atlanta Fed President Raphael Bostic said it will "take a while" for the central bank to be confident that price growth slowdown is sustainable.

Lower interest rates reduce borrowing costs, freeing up funds which could boost and demand for oil.

Global physical crude oil markets are weakening because of soft refinery demand and ample supply, traders and analysts told , which could spell further weakness for benchmark crude futures.

On the other hand, the market appeared little affected by political uncertainty in two major oil-producing countries.

Ebrahim Raisi, a hardliner and potential successor to Supreme Leader Ayatollah Ali Khamenei, was killed in a helicopter crash, while Saudi Arabia's Crown Prince Mohammed Bin Salman deferred a trip to Japan because of the health of his father, the king.

"The death of the Iranian President and the Saudi king's health issue don't seem to be affecting the market much, as it is unclear whether they will have an immediate impact on energy policy," Fujitomi's Tazawa said.

Investors are focusing on supply from the and its affiliates, together known as OPEC+. They are scheduled to meet on June 1 to set output policy, including whether to extend some members' 2.2 million barrels per day of voluntary cuts.

OPEC+ could extend some voluntary output cuts if demand fails to pick up, people with knowledge of the matter previously told Reuters.