Investing.com — Oil prices fell in Asian trading on Monday, reversing last week's gains, as concerns about longer U.S. interest rates and a stronger dollar weighed on oil markets.
Oil prices maintained their modest gains from last week as the market maintained some risk premium as the war between Israel and Hamas escalated, while bets on market tightening continued.
However, it remains trading well below its highs reached in early April as a war between Israel and Iran did not materialize and weak U.S. economic data raised concerns about slowing demand.
Prices expiring in June fell 1.1% to $88.53 a barrel and fell 1% to $82.98 a barrel by 9:41 p.m. ET. .
Concerns about U.S. interest rates rise as inflation remains high and Fed expectations
Markets further backed off bets the Fed would cut interest rates early after the Fed's preferred inflation gauge came in better than expected in March.
Concerns that U.S. interest rates will remain high for an extended period factor in concerns that oil demand will weaken later this year, especially as economic growth slows. This view was reinforced by the release of weaker-than-expected U.S. growth data last week.
Strong inflation data also weighed on oil prices.
The focus now is on the Federal Reserve later this week, when the central bank is widely expected to leave interest rates on hold and issue a hawkish signal on monetary policy.
Beyond the Fed, this week also focused on additional economic indicators for the oil market. Data from China, the biggest importer, is expected to be released later this week and is expected to provide further insight into the country's ongoing economic recovery.
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Geopolitical tensions and supply crunch continue to loom large
Concerns about geopolitical tensions and potential supply risks in the oil market remain.
Ukraine launched more attacks on Russian oil refineries over the weekend, while also asking the United States for more military aid due to the deteriorating situation on the front.
The attacks on Russian refineries factored into bets on tight supplies, especially after Russia announced further production and export cuts earlier this year.
In the Middle East, Israel continues to carry out attacks against Hamas in the Gaza Strip, with little sign of the conflict escalating.
