By Adedapo Adesanya
Oil lost more than $1 a barrel on Monday as Israel ceasefire talks in Cairo tempered fears of a wider Middle East conflict, while US inflation data dimmed the prospect of imminent interest rate cuts.
Brent crude futures for June settled at $88.40 a barrel after falling $1.10 or 1.2 per cent, and the US West Texas Intermediate (WTI) futures settled at $82.63 a barrel after losing $1.22 or 1.5 per cent.
The US Secretary of State made a renewed diplomatic push in the Middle East to secure a cease-fire in Gaza and head off an Israeli offensive against Rafah.
A successful cease-fire agreement would likely further ease the geopolitical risk premium factored into oil prices on fears that the war in Gaza could trigger a broader conflict in the Middle East that disrupts crude supplies.
Israel is waiting for Hamas to respond to a cease-fire proposal in which 33 hostages would be released in exchange for Palestinian prisoners. A Hamas delegation is expected to discuss the cease-fire proposal in Egypt.
Egyptian Foreign Minister Sameh Shoukry said Egypt is hopeful but waiting for a response on the plan from Israel and Hamas.
Markets were also on watch for the US Federal Reserve’s May 1 monetary policy review, which could indicate the direction of the central bank’s interest rate decisions.
The market is wary that the US central bank could hike interest rates by a quarter percentage point this year and next, as inflation and the labour market remain resilient in the world’s largest oil producer.
US monthly inflation rose moderately in March, putting a damper on expectations of rate cuts shortly. Lower inflation would have increased the likelihood of rate cuts, which tend to stimulate economic growth and oil demand.
Prices were also pressured by a stronger US Dollar, which makes oil more expensive for those holding other currencies.
By contrast, an early look at April inflation data from the eurozone, from Spain and Germany, offers a mixed picture for the European Central Bank (ECB), but investors are hopeful it won’t derail an expected June rate cut like in the US.
Inflation data from the wider eurozone is to be released later on Tuesday.