Brent crude futures fell $1, or 1.1 percent, to $88.50 a barrel, before recovering to $88.55 by 0149 GMT. West Texas Intermediate (WTI) futures fell 84 cents, or 1%, to $83.01 a barrel.
Intensified efforts to negotiate a ceasefire between Israel and Hamas eased geopolitical tensions and contributed to the weak opening Monday, IG market analyst Tony Sycamore said. A Hamas delegation will travel to Cairo on Monday for peace talks, a Hamas official told Reuters.
Israel’s foreign minister said Saturday that a planned incursion into Rafah, where more than a million displaced Palestinians are sheltering, could be postponed in the event of a deal involving the release of Israeli hostages.
A White House spokesperson said Israel had agreed to listen to American concerns about the humanitarian effects of a possible invasion. Markets are also monitoring the US Federal Reserve’s monetary policy review on May 1. “Prevailing nervousness ahead of this week’s Federal Open Market Committee meeting, which is expected to take a more hawkish tone, is also playing a role,” Sycamore said. U.S. inflation rose 2.7% in the 12 months through March, data showed Friday, above the Fed’s 2% target. Lower inflation would have increased the likelihood of interest rate cuts, which would boost economic growth and oil demand.
“Persistent inflation in the United States raises concerns about ‘higher and longer-lasting’ interest rates, which would lead to a strengthening of the US dollar and put pressure on commodity prices, said l independent market analyst Tina Teng.
The dollar has strengthened on the prospect of higher and more sustainable interest rates. A stronger dollar makes oil more expensive for those who hold other currencies.
Further weighing on the outlook for oil demand, slowing growth in Chinese industrial profits in March, official data showed on Saturday, the latest sign of the fragility of domestic demand in the world’s second-largest economy.
Cumulative profits of Chinese industrial enterprises rose 4.3 percent to 1.5 trillion yuan ($207.0 billion) in the first quarter from a year earlier, compared with a 10.2 percent rise in the two first months.
But oil prices could rise again if data on U.S. inventories and China’s PMI improve this week, Teng said.
Brent was up 49 cents and WTI 28 cents on Friday on concerns about supply disruptions due to events in the Middle East.
The market discounted potential supply disruptions resulting from Ukrainian drone strikes on oil refineries in Ilsky and Slavyansk, in Russia’s Krasnodar region, over the weekend. The Slavyansk refinery had to suspend some operations after the attack, a plant official said.
