Fear of Wider Conflict Eases, Oil Prices Fall
Oil prices took a hit on Monday, dropping by 1 percent and erasing gains from Friday. The Israel-Hamas peace talks in Cairo helped ease fears of a broader conflict in the Middle East. Additionally, US inflation data dampened hopes of interest rate cuts in the near future, as reported by Reuters.
Market Movement
Brent crude futures declined by 1.09 percent to $88.52 a barrel, while West Texas Intermediate futures were down by 0.99 percent at $83.02 a barrel. The efforts to mediate a ceasefire between Israel and Hamas lessened geopolitical tensions, leading to a weak market opening on Monday.
Peace Talks and Speculations
A Hamas delegation was set to visit Cairo for peace talks, following Israel’s foreign minister hinting at a potential delay in a planned incursion into Rafah. The White House also expressed concerns over the humanitarian impact of the invasion.
Upcoming Federal Reserve Meeting
Investors are closely monitoring the US Federal Reserve’s policy review scheduled for May 1. Speculations are rife that the meeting could adopt a more hawkish tone, given the recent rise in US inflation above the Fed’s target of 2 percent.
Impact on Oil Demand
The stronger US dollar, fueled by concerns of ‘higher-for-longer’ interest rates, has put pressure on commodity prices, making oil more expensive for holders of other currencies. Additionally, China’s slowing industrial profit growth signals weakened domestic demand, further weighing on oil prices.
Future Outlook
Despite the current market conditions, oil prices could see an uptick if US inventory data and China’s PMI index show improvements. The potential for supply disruptions from events in the Middle East and Ukraine also remains a factor to watch in the coming days.