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Investing.com– Oil prices rose slightly in Asian trade on Monday and were nursing steep losses from the prior week amid waning hopes of early interest rate cuts in the U.S., while focus remained on any talk of a ceasefire in the Israel-Hamas war.
Rumors of a potential ceasefire in the war had dented oil prices over the past week, given that potential disruptions to supply, arising from the conflict, were a key point of support for crude prices.
But no truce materialized over the weekend, while clashes between Israeli and Hamas forces continued. Tensions in the Red Sea- between U.S.-led forces and the Iran-aligned Houthi group, also remained in play, as the latter threatened more strikes against vessels in the region.
Brent oil futures expiring in April rose 0.4% to $77.61 a barrel, while West Texas Intermediate crude futures rose 0.3% to $72.53 a barrel by 21:03 ET (02:03 GMT). Both contracts slid more than 7% each last week.
Dollar strength, Powell comments weigh
Oil prices were pressured by strength in the dollar, which crept higher on Monday after a strong bounce on Friday. Nonfarm payrolls data showed the U.S. labor market was running much hotter than expected, which in turn gives the Fed more headroom to keep rates higher for longer.
Adding to this notion, Fed Chair Jerome Powell, in an interview with CBS, reiterated his message that the central bank will not cut interest rates in the near-term. Powell said that the Fed will seek clearer signs of easing inflation and a cooling labor market before unwinding policy, although policymakers will eventually cut interest rates this year.
Powell’s comments, and the strong labor market data, factored into concerns that higher-for-longer interest rates will chip away at global oil demand in the coming months.
But the Fed Chair also signaled that the U.S. economy remained strong, and that a recession seemed unlikely. This bodes well for demand in the world’s largest fuel consumer, especially if interest rates begin declining later this year.
But in the near-term, U.S. fuel demand is expected to remain under pressure from adverse weather conditions across the country.
Elsewhere, a private survey from China showed that service sector activity grew less than expected in January. The reading, which comes after weak official purchasing managers index data last week, brewed more concerns over a sluggish economic recovery in the world’s largest oil importer.
Inflation data from China, for January, is due later this week. The inflation data is due just a day before the start of a week-long holiday in the country for the Lunar New Year.
Source: Investing.com
