Oil prices experienced a notable drop of over 1% on Monday, as investors adopted a cautious stance ahead of this week’s US Federal Reserve meeting and other crucial indicators of global economic health.
Brent crude futures witnessed a decrease of 95 cents, equivalent to 1.1%, settling at $89.53 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude fell by $1.12, or 1.3%, to $84.42.
The dip follows a notable 3% surge in oil prices observed on Friday, driven by concerns of an escalated conflict in the Middle East, a region responsible for one-third of the world’s oil output. However, these concerns have somewhat abated, with Israel conducting a limited ground incursion into Gaza as of Monday.
CMC Markets analyst Tina Teng remarked, “Despite an escalation in the Hamas-Israel war, the ground invasion was widely expected.” Teng noted that the weekend’s outcome signified no further expansion into a broader regional conflict, which contributed to the retreat in oil prices. This sentiment was echoed by John Evans, an oil broker at PVM, who highlighted that market investors often maintain a certain level of oil holdings going into weekends. However, when anticipated fears fail to materialize, they commonly adjust their hedge.
Beyond the Middle East conflict, market watchers are closely monitoring how the Federal Reserve and other central banks will adapt their policies, along with earnings reports from major corporations like Apple. These factors will provide a clearer insight into the financial health of China, the world’s largest importer of crude oil.
The Federal Reserve is widely anticipated to maintain interest rates at their current levels this week. Simultaneously, both Britain and Japan are slated to review their monetary policies. Additionally, China is set to release its Manufacturing and Services Purchasing Managers’ Index (PMI) this week, offering investors a crucial snapshot of the nation’s economic well-being.
Ultimately, the trajectory of oil prices this week hinges heavily on the outcomes of various global and economic indicators and the resolution of the Israel-Hamas conflict. As of now, market sentiment appears to lean towards caution.
Source: Reuters
