Oil prices slide on US rate jitters, strong dollar

Oil prices fell in Asian trade on Monday, reversing course from last week’s gains as fears of higher-for-longer U.S. interest rates and a stronger dollar weighed on crude markets.

Crude prices were sitting on some gains from last week as markets retained some risk premium as the Israel-Hamas war raged on, while bets on tighter markets persisted.

But they were still trading well off highs hit earlier in April, as an Israel-Iran war failed to materialize, while weak U.S. economic data raised concerns over slowing demand.

Brent oil futures expiring in June fell 1.1% to $88.53 a barrel, while West Texas Intermediate crude futures fell 1% to $82.98 a barrel by 21:41 ET (01:41 GMT).

US rate fears grow on sticky inflation, Fed anticipation
Markets further dialed back bets on early interest rate cuts by the Federal Reserve after PCE price index data- the Fed’s preferred inflation gauge- read hotter than expected for March.

Fears of higher-for-longer U.S. interest rates factored into concerns that oil demand will weaken later this year, especially as economic growth weakens. This notion was furthered by weaker-than-expected U.S. growth data last week.

Strength in the dollar, following the inflation data, also pressured crude prices.

Focus is now squarely on a Federal Reserve meeting later this week, where the central bank is widely expected to keep rates steady and offer hawkish signals on monetary policy.

Beyond the Fed, more economic cues were also in focus this week for oil markets. Purchasing managers index data from top importer China is due later in the week, and is expected to offer more insight into an ongoing economic recovery in the country.

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Geopolitical tensions, tight supply bets persist
The specter of geopolitical tensions and potential supply risks in oil markets still remained in play.

Ukraine attacked more Russian oil refineries over the weekend, while also calling on more military aid from the U.S. over worsening conditions on the front lines.

Attacks on Russian refineries factored into bets on tighter supplies, especially as Russia announced more production and export cuts earlier this year.

In the Middle East, Israel kept up its offensive against Hamas in the Gaza strip, with the conflict showing little signs of de-escalation.