Oil prices remained steady on Monday, with concerns about global economic headwinds and potential interest rate hikes from the US Federal Reserve offsetting predictions of tighter supplies resulting from OPEC+ production cuts. Brent crude futures saw a marginal increase of 4 cents, reaching $75.45 a barrel by 0404 GMT, following a 0.8% gain on Friday. Similarly, US West Texas Intermediate crude rose by 3 cents to $70.67 a barrel after closing 1.1% higher in the previous session, according to Reuters.
The second quarter witnessed a decline in both Brent and WTI crude prices, marking the fourth consecutive quarterly fall for Brent and the second quarterly drop for WTI. The deceleration of economic growth in the United States and China, the world’s two largest economies, contributed to this downward trend.
Concerns about a further economic slowdown impacting fuel demand were amplified by Friday’s data, which indicated that US inflation continues to surpass the Federal Reserve’s target of 2%, heightening expectations of potential interest rate hikes. Analysts from National Australia Bank noted in a statement that the “hawkish commentary on rates continues to raise concerns about the demand outlook, weighing on prices.”
The possibility of higher interest rates could strengthen the US dollar, making commodities more expensive for holders of other currencies. Additionally, it may also dampen oil demand. These factors have contributed to the range-bound movement of oil prices, as investors weigh the prospects of tightening supplies against the uncertainties surrounding global economic growth and monetary policy decisions.
The ongoing OPEC+ production cuts, aimed at curbing global oil supplies and supporting prices, have provided some support to the market. However, the effectiveness of these measures could be undermined if economic headwinds persist or intensify, impacting overall energy consumption.
Market participants will continue to monitor global economic indicators and any announcements from central banks, particularly the US Federal Reserve, for further guidance on future oil price movements. The delicate balance between supply tightening efforts and concerns about economic growth will likely shape the direction of oil prices in the coming weeks.
