Oil Prices Steady Amid Holiday Lull, Inflation Concerns Remain

Oil prices remained largely unchanged on Monday, experiencing only minor gains due to public holidays in Britain and the United States. The subdued trading followed a week marked by concerns about the trajectory of U.S. interest rates in the face of persistent inflation.

Brent crude for July delivery saw a slight increase of 21 cents to $82.33 a barrel, while the more actively traded August contract rose 26 cents to $82.10. U.S. West Texas Intermediate (WTI) crude futures also edged up by 23 cents to $77.95.

The previous week witnessed a decline of about 2% for Brent and nearly 3% for WTI, as minutes from the Federal Reserve’s recent meeting revealed that some officials were open to further interest rate hikes if necessary to combat stubbornly high inflation.

Market sentiment has become increasingly cautious as investors reassess their expectations for the Federal Reserve’s monetary policy path. Recent economic data from Western economies has created varying rate cut expectations across different regions, with the European Central Bank leaning towards a June cut while the U.S. appears to be on a trajectory of higher rates for a longer duration.

Attention now turns to the U.S. personal consumption expenditures (PCE) index, due for release on May 31st. This is the Federal Reserve’s preferred inflation measure and could provide further clues about the future of interest rate policy. Additionally, German inflation data on Wednesday and eurozone readings on Friday will be closely watched for indications of a European rate cut next week.

Market participants are also looking ahead to the upcoming meeting of the OPEC+ group of oil producers, scheduled for June 2nd. The consensus among OPEC+ sources suggests a likely extension of the current output cuts of 2.2 million barrels per day.