Oil prices fall due to delayed interest rate reduction speculation, geopolitical uncertainty


(MENAFN) Oil prices experienced a notable decline of approximately 3 percent during settlement two days ago, marking a week of losses spurred by indications from a US Federal Reserve policymaker suggesting a potential delay in interest rate cuts for at least another two months. Brent crude futures dropped by USD2.05, equivalent to 2.5 percent, settling at USD81.62 per barrel. Similarly, US West Texas Intermediate crude futures recorded a decline of USD2.12, or 2.7 percent, closing at USD76.49 per barrel. The week witnessed Brent crude falling by 2 percent and US crude experiencing a more significant decline of over 3 percent. However, signs of robust fuel demand and concerns surrounding supply disruptions may offer potential for price recovery in the near term.

The Federal Reserve has maintained interest rates within a range of 5.25 percent to 5.5 percent since last July, with recent minutes from its policy meeting indicating a cautious approach towards monetary policy adjustments. Most officials expressed reservations about hastening the pace of easing monetary policy, signaling a potential delay in rate cuts. Meanwhile, diplomatic efforts in Paris aimed at brokering a truce in the Gaza Strip represent a significant development in the ongoing conflict, marking the most substantial diplomatic efforts in weeks to address the situation.

Amidst these geopolitical developments, Tim Evans, an independent oil market analyst, highlighted the potential implications for oil prices in a note. While ceasefire talks may lead to expectations of reduced geopolitical tensions, concerns persist in the Red Sea region following attacks launched by the Yemeni Houthi group last Thursday. These attacks have compelled cargo ships to alter their routes, underscoring the ongoing geopolitical complexities that continue to influence oil market dynamics.

Overall, the retreat in oil prices reflects a confluence of factors, including uncertainties surrounding monetary policy decisions and geopolitical tensions. As markets digest these developments, attention remains focused on emerging trends in fuel demand, supply dynamics, and diplomatic efforts aimed at mitigating geopolitical risks in key oil-producing regions.

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