Oil prices decline amid peace talks in the Middle East; anticipation builds for the Fed’s decision.
Oil prices dipped on Monday as peace negotiations between Israel and the militant group Hamas in Cairo alleviated concerns about a broader conflict in the Middle East disrupting oil supplies. However, cautious sentiment ahead of the upcoming Federal Reserve meeting limited the extent of the losses.
Middle East Peace Talks
A Hamas spokesman told Reuters on Sunday that a delegation from Hamas will travel to Cairo on Monday to hold discussions aimed at achieving a ceasefire. The party is anticipated to respond to Israel’s most recent request for a gradual truce in Gaza, which was presented on Saturday.
Sharp gains earlier this month were sparked by traders’ fears that the dispute between Hamas and Israel might escalate into a larger war in the oil-rich region, which could severely disrupt supply from the region.
US rate concerns rise due to sticky inflation and Fed expectations.
The markets reduced their expectations for early interest rate cuts by the Federal Reserve following the release of hotter-than-expected PCE price index data for March, which is the Fed’s preferred inflation measure.
Concerns about U.S. interest rates remaining elevated for an extended period contributed to worries about a potential weakening in oil demand later in the year, particularly as economic growth shows signs of slowing. These concerns were amplified by last week’s underwhelming U.S. growth figures.
Crude prices were also under pressure due to the dollar’s strength after the inflation data.
Now, all eyes are on the Federal Reserve meeting later this week, when it is generally anticipated that the institution will maintain stable interest rates and send out aggressive signals about monetary policy.
This week, the oil markets were also focused on other economic indicators outside of the Federal Reserve. Later this week, purchasing managers index data from China, the world’s largest importer is anticipated to provide additional context for the country’s ongoing economic recovery.