Oil prices declined in early Asian trading on Monday, reversing gains from Friday. This drop came as Israel-Hamas peace talks in Cairo alleviated concerns about a broader conflict in the Middle East, and U.S. inflation data dampened expectations of imminent interest rate cuts.
Brent crude futures fell by as much as $1, or 1.1%, to $88.50 a barrel before recovering slightly to $88.55 at 0149 GMT. West Texas Intermediate (WTI) futures were down 84 cents, or 1%, at $83.01 a barrel.
The increased efforts to broker a ceasefire between Israel and Hamas eased geopolitical tensions, leading to a cautious start on Monday, according to IG market analyst Tony Sycamore. A Hamas delegation is set to visit Cairo for peace talks.
In response to concerns about a potential incursion into Rafah, Israel’s foreign minister indicated a delay could be considered if a deal involving the release of Israeli hostages is reached.
The anticipation of the U.S. Federal Reserve’s May 1 policy review also contributed to market jitters. “Also playing a part are some nerves ahead of this week’s Federal Open Market Committee meeting which is expected to come with a more hawkish tone,” Sycamore noted.
U.S. inflation figures exceeding the Fed’s 2% target raised concerns about prolonged high interest rates, leading to a stronger U.S. dollar and impacting commodity prices, said independent market analyst Tina Teng.
Further influencing oil demand, China reported a slowdown in industrial profit growth for March, reflecting weak domestic demand.
Despite these factors, oil prices could see upward movement based on U.S. inventory data and China’s PMI index this week, Teng suggested.
On Friday, Brent settled up 49 cents and WTI up 28 cents due to concerns about supply disruptions in the Middle East. The market largely ignored potential supply disruptions caused by Ukrainian drone strikes on Russian oil refineries over the weekend.
