Oil prices fell by more than $1 per barrel on Monday, with Brent crude futures settling at $88.40 and WTI futures closing at $82.63. The decline was driven by a combination of factors, including progress in ceasefire talks between Israel and Hamas, as well as concerns about the impact of persistent inflation on the prospect of U.S. interest rate cuts.
The air strikes by Israel over the weekend killed at least 25 Palestinians, but the arrival of Hamas leaders in Cairo for talks with Egyptian and Qatari mediators has raised hopes of a ceasefire. This has reduced the geopolitical risk premium in the oil market.
Meanwhile, the U.S. monthly inflation data, which rose moderately in March, has dimmed the prospect of imminent interest rate cuts by the Federal Reserve. Investors are now pricing in a higher probability of rate hikes in the coming months, which could weigh on economic growth and oil demand.
The strength of the U.S. dollar, driven by the prospect of higher interest rates, also put pressure on commodity prices, including oil, as it makes the commodity more expensive for those holding other currencies.
The oil market is also closely watching the upcoming U.S. nonfarm payrolls report, which is scheduled for release on Friday and could have a significant impact on next week’s oil trade.