Oil prices remained relatively unchanged on Monday, with Brent crude futures trading around $83 a barrel and West Texas Intermediate (WTI) futures at $78.53. This comes after prices lost around $1 per barrel in the previous session, as signs emerged that U.S. policymakers are likely to keep interest rates higher for longer.
The focus has shifted back to economic factors, with commentary from policymakers suggesting that a lowering of borrowing costs is expected sooner in the UK and Europe than in the United States. Investors are now waiting for this week’s U.S. inflation data, which will further inform the Federal Reserve’s interest rate policy. Analysts expect the U.S. central bank to keep its policy rate on hold for longer, supporting the dollar and making dollar-denominated oil more expensive for investors holding other currencies.
Meanwhile, Chinese data showed consumer prices rising for a third consecutive month in April, while producer prices extended declines, indicating improved domestic demand. Additional price support comes from expectations that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, will extend supply cuts into the second half of the year.
Iraq, the second-largest OPEC producer, has reiterated its commitment to the voluntary oil production cuts agreed by the producer group. However, the Iraqi oil minister had previously suggested that the country had made enough voluntary reductions and would not agree to any additional cuts proposed by the wider OPEC+ group at its June meeting. OPEC+ has previously called out Iraq for pumping more than its output quota in the first three months of 2024, and Baghdad agreed to compensate with additional production cuts over the rest of the year.