Oil futures: Crude rally pauses as US rate-cut hopes blunted
Quantum Commodity Intelligence – Crude oil futures Monday were little changed, albeit off from earlier lows, as the recent upwards trend paused over concerns that a first US rate cut of 2024 faces delays.
Front-month Apr24 ICE Brent futures were trading at $83.33/b (1900 GMT), compared to the day's low of $82.55/b and Friday's settle of $83.47/b, while the Apr24/May24 spread held around +$0.80/b.
At the same time Apr24 NYMEX WTI was at $78.24/b amid light holiday trade, versus Friday's settle of $78.46/b, while Mar24 last traded at $79.40/b heading into the expiry.
Higher-than-expected US CPI figures released last week have dampened the appetite among Federal Reserve officials for an early rate cut, as inflation remains stubbornly high.
"According to Fed funds futures, the probability of a March rate cut is now less than 10%, with the likelihood of a May cut standing at under 30%," said Stephen Innes, managing partner SPI Asset Management.
"This marks a significant scaling back from earlier expectations, which had priced in six quarter-point rate cuts in 2024 at the beginning of the year, compared to just over three cuts today."
The oil demand outlook for this year also remains uncertain after last week's IEA report forecasting a slowdown in demand growth, in stark contrast to OPEC, which sees consumption growing by another 2.2 million bp this year.
Geopolitical
But countering economic headwinds, geopolitical events continue to provide support after Yemen's president, Dr Rashad Al-Alimi, warned that Houthi militants will never stop threatening international navigation and global trade interests even if the war in Gaza stops.
The US on Sunday carried out five strikes in areas of Yemen controlled by Houthi rebels, while over the weekend, Houthis claimed responsibility for a missile attack on a tanker carrying Russian crude oil bound for India, named as the MT Pollux.
In the wider regional conflict, Israel and Hezbollah exchanged fire across the border, while Israel has said it will escalate its military activities in Gaza if the remaining hostages are not returned in the coming weeks.
