Oil futures fell early Monday, extending the previous week’s decline as traders fretted about the global outlook for demand as expectations central banks will begin cutting rates soon continued to fade.
Price moves
-
West Texas Intermediate crude
CL00,
-0.27%
for April delivery
CL.1,
-0.27% CLJ24,
-0.27%
fell 18 cents, or 0.2%, to $76.31 a barrel on the New York Mercantile Exchange. -
April Brent crude
BRNJ24,
-0.34% ,
the global benchmark, was down 25 cents, or 0.3%, at $81.37 a barrel on ICE Futures Europe. May Brent
BRN00,
-0.27% BRNK24,
-0.27% ,
which is more actively traded, fell 23 cents, or 0.3%, to $80.57 a barrel.
Market drivers
Crude prices pulled back last week, with WTI ending Friday at its lowest since Feb. 8 and Brent posting its lowest settlement since Feb. 14, based on front-month contracts.
“With inflation stubbornly hovering well above the Fed’s 2% target and the U.S. economy showing a resilience few had predicted, the markets moved to price in a scenario where interest rates remain high for longer,” Ricardo Evangelista, senior analyst at ActivTrades, said in emailed comments.
“Against this background, economic activity is expected to be impacted, leading to lower forecasts for future oil demand,” he said.
The Federal Reserve’s favored inflation gauge, the core personal-consumption-expenditures index, is due Thursday.
Investors came into 2024 pricing in six to seven quarter percentage point rate cuts over the course of the year, beginning in March. As the data came in and the Fed pushed back on those expectations, markets now see a somewhat better-than-50% chance cuts will begin in June and that the Fed will deliver only three or four by year-end, according to the CME FedWatch tool.
See: Should stock-market investors care more about Nvidia than the Fed? Inflation data will provide a test.
The U.S. and U.K. conducted more strikes against Houthi targets inside Yemen on Saturday, the Wall Street Journal reported, extending a fight against the Iran-backed group that has targeted shipping in the Red Sea with drone and missile attacks.
While concerns remain over the potential for an escalation of the Israel-Hamas war, so far crude supplies have been largely unaffected.
“This bearish demand outlook, both in China and the West, has more than offset the supply-side pressures arising from ongoing geopolitical turbulence in the Middle East and self-imposed output cuts by OPEC, keeping the price of the barrel well below the levels touched during the fourth quarter of last year,” Evangelista wrote.
