Oil prices dipped more than 1% on Monday as investors maintained a cautious outlook in anticipation of this week’s US Federal Reserve meeting and ongoing indicators reflecting the state of the global economy. Brent crude futures took a hit, losing 95 cents, or 1.1%, to settle at $89.53 per barrel, while U.S. West Texas Intermediate (WTI) crude fell by $1.12, a decline of 1.3%, closing at $84.42.
The recent drop comes on the heels of a 3% surge in oil prices on Friday, driven by escalating concerns of an extended conflict in the Middle East, a region responsible for approximately one-third of global oil production. However, as of Monday, some of these concerns have been alleviated, as Israel initiated a limited ground incursion into Gaza, marking a departure from more extensive military action.
Tina Teng, an analyst at CMC Markets, noted, “Despite an escalation in the Hamas-Israel war, the ground invasion was widely expected. The weekend outcome signals no further expansion into a wider regional war, which caused a retreat in oil prices.” This sentiment was echoed by John Evans, an oil broker at PVM, who pointed out that market investors frequently maintain a cautious position leading into weekends. However, when the anticipated fears fail to materialize, they often shed their hedges.
In addition to developments in the Middle East, investors are closely monitoring how the Federal Reserve and other central banks may adjust their monetary policies. Furthermore, the earnings reports from major corporations, such as Apple, are being scrutinized to gain insight into the financial health of China, the world’s largest importer of crude oil.
The Federal Reserve’s stance is widely anticipated to remain unchanged during this week’s meeting, while Britain and Japan are set to review their monetary policies. China, on its part, will release its Manufacturing and Services Purchasing Managers’ Index (PMI) data, providing a valuable glimpse into the state of its economy. These economic indicators, along with the resolution of the Israel-Hamas conflict, will significantly influence the direction of oil prices throughout the week.
As of now, market sentiment appears to be one of caution. The fate of oil prices in the coming days remains closely tied to the outcome of various indicators of the global economy and the ongoing Middle East conflict resolution. Investors are keeping a watchful eye on these factors as they navigate the volatile energy market.
Source: Reuters
