Oil Prices Dip After Strong Week; OPEC, Middle East Cues in Focus
Oil Prices Lower in Early U.S. Trade
Oil prices were lower in early U.S. trade on Monday as investors locked in some profits after stellar gains over the prior week. The focus now turns to any more developments in the Israel-Hamas war and clues from closely-monitored industry reports.
Price Movements
Prices for expiring oil contracts in April had fallen 0.7% to $81.63 a barrel, while prices for had dropped 0.5% to $76.49 per barrel by 09:39 ET.
Impact of Israel-Hamas Conflict
Both contracts rose about 5% to 6% in the past week, bolstered by Israel rejecting a ceasefire proposal from Hamas and continuing deadly air strikes on the Gaza Strip. The move pointed to little de-escalation in the conflict, and saw traders begin pricing in a greater risk premium from the war.
Key Support for Oil Prices
The Israel-Hamas war has been a key point of support for oil in recent months due in part to concerns that the conflict could cause disruptions in global oil supplies. Meanwhile, attacks by the Iran-aligned Houthi group in the Red Sea have also impacted shipping activity. Markets were now waiting for any more cues from the region.
Impact of Middle East Tensions
Worries over the Middle East saw crude prices largely rise past a recovery in U.S. production, which increased to record highs in February after cold weather-related disruptions in production. U.S. fuel supplies were tightened by several refiners remaining shut for maintenance.
Upcoming Reports and U.S. Inflation
The Organization of the Petroleum Exporting Countries is set to release its monthly report on Tuesday, followed by the International Energy Agency on Thursday. Uncertainty hovers around whether the two will maintain their oil demand forecasts for 2024 and 2025. Key inflation figures due out on Tuesday could also provide more cues on U.S. rates.
The headline is expected to have slowed marginally in January, and Federal Reserve policymakers have stressed that they would like to see more evidence that inflation is easing back down to its stated 2% target prior to potentially cutting borrowing costs.
