Oil prices – Oil prices fell more than $1 a barrel on Monday as ceasefire talks between Israel and Hamas in Cairo eased concerns about a broader conflict in the Middle East.
Additionally, US inflation data suggested that interest rate cuts may not occur imminently, further dampening market sentiment. June Brent crude futures, expiring Tuesday, fell $1.25, or 1.4%, to $88.25 a barrel at 11:13 a.m. EDT. The more active July contract fell $1.01, or 1.14%, to $87.20 a barrel. US West Texas Intermediate (WTI) futures also fell $1.19, or 1.4%, to $82.66 a barrel.
Oil prices decline:
- Israeli airstrikes killed at least 25 Palestinians and injured scores on Monday, coinciding with the arrival of Hamas leaders in Cairo for new talks with Egyptian and Qatari intermediaries.
- Egyptian Foreign Minister Sameh Shoukry expressed optimism about the situation but indicated that Egypt is waiting for answers on the proposed plan from both Israel and Hamas.
- Market participants were also closely monitoring the U.S. Federal Reserve’s monetary policy review scheduled for May 1, which could provide insight into the central bank’s stance on interest rate adjustments.
Investors are acting cautiously, pricing in a higher likelihood that the Federal Reserve could raise interest rates by a quarter percentage point both this year and next, given persistent inflationary pressures and the strength of the labor market.
In March, monthly inflation in the United States saw a moderate increase, tempering expectations of imminent rate cuts. If inflation had been lower, it would have reinforced expectations of rate cuts, which normally stimulate economic expansion and oil demand.
“Crude oil prices showed significant volatility last week, recovering from their lows amid global supply concerns and a decline in US oil inventories. Rising tensions in the Middle East following Israel’s escalation in Gaza renewed concerns about global oil supplies. US crude oil stocks saw a larger-than-expected drop, according to the US EIA, with a drop of 6.4 million barrels during the week ending April 19, 2024, in compared to a planned increase of 1.6 million barrels.
This unexpected decline in inventories, along with rising tensions in the Middle East, supported oil prices to lower levels. However, disappointing US GDP data, rising US inflation, and the strength of the dollar index are limiting potential gains for crude oil prices. Anticipating continued volatility in today’s trading session, we forecast that crude oil will find support between $82.10 and $81.40, with resistance levels between $83.30 and $83.90,” said Rahul Kalantri, Vice President of raw materials of Mehta Equities Ltd.