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Oil Prices Continue Decline Amid Economic Uncertainty and Rate Hike Concerns

by Jennifer

Oil prices experienced a further decline in Asian trade on Monday, extending losses from the previous session. Market uncertainty regarding demand, particularly in light of the prospect of higher U.S. interest rates, contributed to the ongoing downturn.

Investors are closely monitoring a series of crucial economic indicators scheduled for release this week, alongside signals from the Federal Reserve regarding the future trajectory of interest rates.

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Last week, crude prices faced significant downward pressure, dropping about 3% on Friday and erasing all gains for the week. Concerns about slowing demand, especially following hawkish signals from the Fed, overshadowed geopolitical instability in the Middle East, which had previously provided support due to fears of potential supply disruptions in 2024.

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In the current session, Brent oil futures expiring in April fell by 0.5% to $81.24 per barrel, while West Texas Intermediate crude futures declined by 0.4% to $75.75 per barrel as of 20:14 ET (01:14 GMT).

Investors are awaiting key economic data releases this week, including inflation figures from major economies such as Japan, Australia, the euro zone, and the U.S. The U.S. PCE price index, the Fed’s preferred inflation gauge, is expected to influence the central bank’s plans for interest rates later in 2024.

Traders are adjusting expectations for rate cuts in May and June after numerous Fed officials emphasized that the bank is in no rush to start trimming rates. Additional comments from Fed officials are anticipated later this week.

Focus is also on the second reading of U.S. fourth-quarter gross domestic product, which is likely to confirm that economic growth, while still outpacing its developed-world peers, has slowed from the previous quarter. Despite the slowdown, robust growth is expected to support higher interest rates in the U.S.

China’s Purchasing Managers Index (PMI) data is another key point of interest this week, offering insights into the country’s economic recovery. Despite signs of a slowing recovery, recent stimulus measures and indications of increased consumer spending have fueled hopes for a sustained economic rebound in the world’s largest oil importer.

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