Crude oil prices started the week with losses after reversing gains from last week after the latest US inflation data suggested there will be no rate cuts in the near future.
In addition, signals from Israel that the ceasefire with Hamas is still likely to help lower oil prices. Brent crude dipped below $89 a barrel in mid-Asian trading and West Texas Intermediate was slightly lower at $83 a barrel.
Last Friday, the Commerce Department reported an inflation rate of 2.7% for March based on Personal Consumption Expenditure (PCE) data which increased from an annual rate of 2.5% in February.
According to the Chief Investment Officer at Independent Advisor Alliance, Chris Zaccarelli said the market should have breathed a sigh of relief this morning. As high inflation levels are the new norm for 2024, the market needs to overcome expectations for a Fed rate cut.
However, what is good for the oil market is not necessarily good for all markets as the prospect of continued interest rate hikes is generally considered bearish.
Higher interest rate hikes continue to strengthen the US dollar and push up global crude oil prices as they are traded in dollars.
The close relationship between US monetary policy and oil prices has caused traders to act quickly as evidenced by the report. Every time the delay in lowering the rate will be the cause of the decline in global oil prices.
The situation in the Middle East, Hamas stated that they will attend the ceasefire talks in Cairo in the hope of ending the conflict.
If the ceasefire vision succeeds, oil prices will continue to decline as the risk of supply disruptions will end.
