Oil Prices Fall as Israel-Hamas Peace Talks Ease Middle East Tensions, US Inflation Data Dims Rate Cut Hopes

Oil prices fell in early Asian trading on Monday as Israel-Hamas peace talks in Cairo alleviated concerns about a wider conflict in the Middle East.

Brent crude futures fell by as much as $1, or 1.1%, to $88.50 a barrel, while West Texas Intermediate (WTI) futures were down 84 cents, or 1%, at $83.01 a barrel.

The intensified efforts to mediate a ceasefire between Israel and Hamas contributed to the weak opening. A Hamas delegation is visiting Cairo for the negotiations, which could involve the release of hostages in exchange for a truce and the "restoration of sustainable calm" in Gaza.

Additionally, US inflation data further diminished the prospects of interest rate cuts anytime soon, with the US inflation rising 2.7% in the 12 months through March, above the Fed's target of 2%. The stronger US dollar, resulting from the prospect of 'higher-for-longer' interest rates, also put pressure on commodity prices.

Why this matters: The Israel-Hamas conflict has raised concerns about potential supply disruptions in the Middle East, a key oil-producing region. A ceasefire deal could alleviate some of the geopolitical risks factored into oil prices. However, the US inflation data suggests that the Federal Reserve may keep interest rates higher for longer, which could impact global economic growth and oil demand.

Despite the potential ceasefire, tensions in the region remain high. The Biden administration is pushing for a long-term political solution, with the possibility of Saudi Arabia normalizing relations with Israel in exchange for security guarantees and cooperation on a civilian nuclear program. US Secretary of State Antony Blinken arrived in Saudi Arabia to discuss ceasefire talks and post-war plans for Gaza with Arab and European officials at the World Economic Forum meeting in Riyadh.

China's industrial profit growth also slowed down in March, indicating frail domestic demand in the world's second-largest economy. However, oil prices could swing higher again if US inventory data and China's PMI index show improvements this week.

The oil market's structure suggests continued bullish sentiment among traders, with the Brent timespreads signaling expectations of tighter supply relative to demand in the near term. OPEC's Secretary General Haitham Al Ghais stated that the demand for oil is still growing, and the focus should be on cutting emissions rather than reducing oil use.

In conclusion, oil prices fell on Monday as Israel-Hamas peace talks in Cairo eased concerns over a potential escalation in the Middle East conflict. The US

Key Takeaways

• Oil prices fell as Israel-Hamas ceasefire talks in Cairo eased concerns.
• US inflation data diminished prospects of interest rate cuts, strengthening the dollar.
• Ceasefire could alleviate geopolitical risks, but Fed may keep rates higher for longer.
• China's industrial profit growth slowed, but oil prices could rise on inventory, PMI data.
• OPEC sees growing oil demand, focusing on emissions cuts rather than reducing oil use.