Oil prices are under pressure after 1% drop

Oil prices decline on weak fuel demand and mixed rate cut expectations, Brent crude trades near $82.83, WTI at $78.20 after 1% drop Friday.

By Nadia Elbilassy | @Nadia Elbilassy | 13 May 2024

Market open
  • Iraqi minister's conflicting statements add pressure to oil markets.

  • Dollar stabilizes against major currencies ahead of U.S. inflation data.

  • Markets anticipate rate cuts with a 61.2% likelihood, focus on PPI and CPI releases this week.

Oil prices

Oil prices continued their decline amid indications of weak fuel demand and as markets have started to price in mixed rate cut expectations and weak slow economic growth.

Brent crude was last seen near $82.83 a barrel, while U.S. West Texas Intermediate crude stood at $78.20 a barrel, down 5 cents. After dropping 1% on Friday on supply disruption concerns.

Today’s weakness was spurred by statements from an Iraqi minister who stated on Saturday that Iraq had implemented voluntary production cuts and would not support any further reductions proposed by OPEC. However, he later reversed these comments the following day.

Oil markets have been under pressure on sluggish economic growth in both the US and China especially after China’s producer price index contracted in April and US GDP dropped significantly from Q4.

The Dollar

The dollar stabilized against major currencies as investors awaited U.S. inflation data that may cause a turning point for the Federal Reserve later this year.

Following a weaker-than-anticipated U.S. payrolls report for April and a seemingly dovish stance from the Federal Reserve earlier this month, expectations have grown for potential rate cuts in the coming months.

According to CME's Fed Watch Tool, markets have priced in a 61.2% likelihood of rate cuts starting at the Fed's September meeting, with around 50 basis points of cuts anticipated in total.

However, recent comments from Fed officials have been mixed, with debates over whether current interest rates are sufficiently high.

This week markets will shift their focus to the release of inflation indicators such as the producer price index (PPI) on Tuesday, followed by the consumer price index (CPI) on Wednesday.