Oil prices experienced a decline on Monday, retracting earlier gains, as the optimism surrounding the debt ceiling agreement was dampened by renewed expectations of the Federal Reserve’s persistent interest rate increases.
As of 07:00 ET (11:00 GMT), US crude futures fell by 0.15%, settling at $72.56 per barrel, while the Brent contract slipped by 0.30% to $76.75 per barrel. With US and U.K. markets closed for a holiday, trading volumes are anticipated to remain subdued.
Both benchmark oil prices, which had witnessed two consecutive weeks of growth, were initially buoyed by hopes that raising the $31.4 trillion US debt limit would avert a potentially catastrophic default, benefiting the world’s largest economy and primary oil consumer.
Nevertheless, traders harbored concerns regarding the Federal Reserve’s potential decision to raise borrowing costs after the US central bank’s preferred inflation measure exceeded expectations in April. Analysts, cited by Reuters, pointed out that this surge could impact oil demand.
Ahead of their June meeting, Fed officials still await additional data, including the nonfarm payrolls report for May. Economists predict that this widely observed employment report, set to be released on Friday, will indicate an addition of 180,000 jobs in May, a decline from the previous month’s figure of 253,000.
The CME FedWatch Tool, designed to track the likelihood of rate changes, currently reflects a 66.42% probability that the Fed will raise rates by a quarter-point during its June meeting, an increase from 25.66% a week ago.
Conversely, there is now a 33.58% chance that the bank will maintain rates unchanged, down from 74.34% recorded last Monday.
In other news, the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, are scheduled to convene on Sunday, with some uncertainty surrounding whether the group will reduce production levels.
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