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Oil Falls as Mideast Tensions Wane, Traders Await Fed Meeting - BLOOMBERG
(Bloomberg) -- Oil slumped as geopolitical tensions from Yemen to Iran showed signs of easing and traders searched for clues on the US Federal Reserve’s policy outlook.
West Texas Intermediate futures dipped by more than 1% to trade below $59 a barrel, after briefly topping $60. US President Donald Trump said the US would stop its bombing campaign against Houthis in Yemen after a ceasefire was facilitated by Oman. That followed earlier comments from Vice President JD Vance that a nuclear deal with Iran could see the OPEC member reintegrated into the global economy.
In the US, the Federal Reserve is expected to keep rates steady in their meeting Wednesday. Traders are awaiting comments by Chair Jerome Powell for insight into whether Trump’s trade and economic policies are changing the agency’s view on the pace of rate cuts.
Prices failed to sustain an earlier rally on news that US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will meet with Chinese officials in Switzerland later this week, the first confirmed discussions since Trump imposed sweeping tariffs. Beijing also cut its policy rate to fortify its economy in the face of reciprocal tariffs.
“There is a fear that the trade negotiations in Switzerland with China could backfire and turn into a demand destruction event,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA. Building market sentiment that a rate-cut is not in the cards anytime soon is also weighing on prices, he added.
Oil has trended lower since late January due to escalating trade frictions and plans by OPEC+ to keep boosting idled supply, but prices have moved away from their lows in the last couple of days.
The decline in crude prices will likely lead to falling American shale output, according to Diamondback Energy Inc., the largest US independent oil producer in the Permian Basin. In another sign of the hit to output, the Energy Information Administration cut its forecast for US crude production this year for a second straight month.
