Oil prices fell on Monday as jitters over the economic impact of the US Federal Reserve potentially raising interest rates and weaker Chinese manufacturing data were enough to outweigh support from new OPEC+ supply cuts taking effect this month.

Brent futures for July delivery were down 56 cents, or 0.7%, at $79.77 a barrel at 0547 GMT, while US West Texas Intermediate (WTI) crude lost 63 cents, a 0.8% drop, to trade at $76.15.

US consumer spending was flat in March as an increase in outlays on services was offset by a decline in goods, but persistent strength in underlying inflation pressures could see the Federal Reserve raising interest rates again.

“The prospect of further rate hikes to be announced by the Fed this week is expected to drive an increase in near-term price volatility,” said Baden Moore, head of commodity and carbon strategy at National Australia Bank (NAB).

The Fed is expected to increase interest rates by another 25 basis points this week. The US central bank has raised its policy rate by 475 basis points since March of last year from the near-zero level to the current 4.75%-5.00% range.

In the week ahead, the Reserve Bank of Australia is widely expected to extend a rate hike pause on Tuesday and the European Central Bank could surprise with an outsized half-point increase on Thursday.

Meanwhile China’s manufacturing purchasing managers’ index (PMI) declined to 49.2 from 51.9 in March, official data showed on Sunday, slipping below the 50-point mark that separates expansion and contraction in activity on a monthly basis.

Factory activity in Japan, the world’s third biggest economy, contracted for the sixth straight month in April, but the manufacturing sector was edging towards stabilisation amid a slower decline in new orders.

“Investors remain cautious amid mixed economic signals. Brent crude has been tracking broader markets in recent sessions, with a slew of economic data creating more uncertainty about the outlook,” ANZ Research said in a client note.

From Monday, oil output cuts of around 1.16 million barrels per day - a surprise move last month by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+ - took an effect.

“Post the recent OPEC supply cuts, which impact from May, we believe the oil market will be in deficit through the remainder of the second quarter, which - combined with a seasonal uptick in OECD demand as well as China’s increase in demand y/y - we expect to drive prices higher,” said NAB’s Moore.