Oil prices dropped on Monday after two consecutive sessions of gains. Manish Raj, managing director at Velandera Energy Partners, attributed the fall in oil prices to stubborn inflation data and the fear of a hawkish Federal Reserve. This further complicated the already difficult oil trade, due to the presence of excess inventory. The West Texas Intermediate crude for April delivery, the U.S. benchmark, fell by 0.90% and settled at $75.68 per barrel on the New York Mercantile Exchange.
The oil market has been quite volatile in recent times. The prices of oil have been affected by a variety of factors, including geopolitical tensions, economic growth, and the production of oil by OPEC and non-OPEC countries. Inflation is one of the most important factors that affects the oil prices. When inflation rises, the demand for oil increases, and this leads to an increase in the price of oil. On the other hand, when inflation falls, the demand for oil decreases and the price of oil falls.
The Federal Reserve plays an important role in the oil market. The Federal Reserve sets the interest rates, which affects the demand for oil. When the interest rates are low, people are more likely to borrow money and invest in oil, which leads to an increase in the demand for oil and an increase in the price of oil. On the other hand, when the interest rates are high, people are less likely to borrow money and invest in oil, which leads to a decrease in the demand for oil and a decrease in the price of oil.
The presence of excess inventory also affects the oil market. When there is a large amount of oil in the market, the prices of oil tend to fall. This is because the supply of oil exceeds the demand, and this leads to a decrease in the price of oil. On the other hand, when there is a shortage of oil in the market, the prices of oil tend to rise. This is because the demand for oil exceeds the supply, and this leads to an increase in the price of oil.
Overall, the oil market is highly volatile and is affected by a variety of factors. Inflation, the Federal Reserve, and the presence of excess inventory are just some of the factors that can affect the price of oil. As such, it is important for investors to keep an eye on these factors in order to make informed decisions when investing in the oil market.