A customer refuels at a Safeway gas station in Hercules, California, US, on Tuesday, May 23, 2023.
David Paul Morris | Bloomberg | Getty Images
Oil prices fell Monday as the Federal Reserve moves carefully on interest rates cuts, and the U.S. pushes for an extended pause in the Israel-Hamas War.
The West Texas Intermediate contract for March dropped 77 cents, or 0.96%, to trade at $71.63 a barrel Monday morning. The Brent contract for April was down 51 cents, or 0.66%, to trade at $76.79 a barrel.
Federal Reserve Chairman Jerome Powell said in an interview Sunday the central bank is unlikely to slash rates in March. Powell’s comments came after a much stronger jobs report than expected Friday, with the labor market adding 353,000 jobs compared to 185,000 expected.
“With the economy strong like that, we feel like we can approach the question of when to begin to reduce interest rates carefully,” Powell told CBS’ “60 Minutes.” Lower interest rates typically boost economic growth which would imply stronger crude oil demand.
The dollar rose to its highest level in more than two months Monday as investors reduce their expectations for rate cuts. A stronger greenback makes crude oil, which is priced in dollars, more expensive for holders of other currencies which can weigh on demand.
“Oil prices are falling after a reversal in the odds for rate cuts that overshadowed geopolitical risk factors that seem to be boiling over,” Phil Flynn, an analyst with the Price Futures Group, wrote in a Monday note.
Oil Prices Today
Oil traders are also closely watching whether the U.S. can successfully secure a truce in Gaza that would promise to ease escalating tensions in the Middle East.
U.S. Secretary of State Antony Blinken is heading to the region to push for an extended humanitarian pause in the fighting in exchange for the release of hostages held by Hamas. Blinken will visit Saudi Arabia, Egypt, Qatar, Israel and the West Bank this week.
The war in Gaza has pushed the U.S. and Iran to the brink of a direct confrontation, one which analysts have warned could impact crude supplies if there is a disruption in the Strait of Hormuz.
The U.S. launched retaliatory airstrikes Friday against Iran’s Islamic Revolutionary Guard Corps and allied militias in Iraq and Syria. The airstrikes, which hit more than 85 targets, came in response to the deaths of three U.S. troops in a drone strike by Iran-allied militants.
The U.S and the U.K. also launched renewed strikes Saturday against Houthi militants in Yemen. The Houthis, who are allied with Iran, have repeatedly targeted commercial shipping in the Red Sea.
