Investing.com - Oil prices fell in early U.S. trading on Friday, heading for their first monthly decrease since November as investors eyed U.S. trade tariff worries and hopes of a Russia-Ukraine peace deal.

Brent oil futures fell 1.6% to $72.42 per barrel as of 10:06 ET (15:06 GMT), while West Texas Intermediate (WTI) crude futures dropped 1.6% to $69.26 per barrel.

Both contracts were set to notch their first monthly drop in three months.

Uncertainty regarding U.S. President Donald Trump’s plan to roll out sweeping tariffs has dented oil markets, with traders fretting over the potential impact of the levies on demand.

Meanwhile, the prospects of a peace agreement to end the war in Ukraine have exacerbated worries over a possible return of Russian oil supplies to the global market.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) are also reportedly deliberating on whether to proceed with a planned output increase in April 2025. The alliance, currently reducing output by 5.85 million barrels per day, faces internal divisions.

U.S. PCE inflation in focus

U.S. inflation matched the prior month’s pace and slowed on an annualized basis in January, while consumer spending unexpectedly contracted, presenting a muddled economic picture for Federal Reserve policymakers considering the path ahead for interest rates.

In theory, lower rates could weaken the dollar, making oil cheaper for foreign buyers. This may boost demand and support higher oil prices.

The Personal Consumption Expenditures (PCE) Price Index ticked up by 0.3% last month, according to data from the Commerce Department’s Bureau of Economic Analysis on Friday. The figure was in line with December’s pace, which was itself the largest increase since April 2024.

In the 12 months through January, PCE inflation eased slightly to 2.5% from 2.6%, meeting economists’ estimates.

Stripping out food and energy, so-called core PCE inflation came in at 2.6% year-on-year, cooling from 2.9% in December and equalling predictions. The initial December gauge was at 2.8%.

On a monthly basis, core PCE accelerated marginally to 0.3% from 0.2%, also meeting forecasts.

Meanwhile, consumer spending, which accounts for a large bulk of U.S. economic activity, dropped by 0.2% following an upwardly-revised expansion of 0.8% in December. Analysts had seen the number increasing by 0.2%.

The Fed, which keeps particularly close tabs on the PCE data, pushed pause on a cycle of interest rate reductions at its last meeting in January, partly citing concerns around the possible impact of U.S. President Donald Trump’s import tariff and immigration plans on inflation. The central bank had slashed borrowing costs by 100 basis points to a range of 4.25% to 4.5% in a series of gatherings late last year. It had hiked rates by a sharp 5.25 percentage points in 2022 and 2023 in a bid to stamp out elevated price pressures.

(Ayushman Ojha contributed reporting.)