The price of oil fell by about 0.7%, as the latest inflation data from the United States (the largest consumer of oil in the world) increased concerns about the prospects for fuel consumption. However, the further fall in prices was limited by the ongoing geopolitical tensions in the Middle East, as well as the negative dynamics of the US currency. Meanwhile, Presidents' Day in the US is set to keep trade relatively mutated.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.13% to 104.16. On Friday, Fed policymakers signaled that they need to be patient with interest rate cuts. Higher rates keep up the cost of buying oil, providing for a bearish market trend. According to the CME FedWatch Tool, markets see a 10.5% probability of a 25 basis point rate cut at the Fed meeting in March and a 35.6% probability of a rate cut in May, with approximately 90 basis points of cuts priced in for this year.
At the same time, uncertainty remains about the prospects for Chinese demand after that country returns from a week-long Lunar New Year holiday. Last week, the International Energy Agency lowered its forecast for global oil demand growth in 2024 to 1.22 million barrels per day from 1.24 million barrels per day. "The growth rate of global oil demand is declining, partly due to China. Oil market balances tightened in January, which was facilitated by supply disruptions in the United States and Canada," the IEA said.