Oil prices sink as Fed meeting, key economic data loom

investing.com:

Investing.com — Oil prices fell sharply Monday, as investors adopted a cautious stance at the start of a week that includes several central bank meetings, including the U.S. Federal Reserve, as well as key indications of global economic health.

By 09:55 ET (13.55 GMT), the U.S. crude futures traded 1.6% lower at $84.14 a barrel, while the Brent contract dropped 1.3% to $88.06 a barrel.

Both benchmarks ended Friday up 3% after Israel stepped up a ground assault on Gaza, but the contracts still registered hefty losses over the course of the week. 

Israel has continued to bombard Gaza, from both the air and the ground, but without any signs of further escalation of the conflict — and, more importantly, without any disruption still in the countless numbers of barrels of oil moving around in waters very close to the war zone — the premium traders have placed on this risk has fallen.

Traders will be closely keeping an eye on events in the Middle East, but the situation will need to escalate for prices to rise substantially.

Instead, traders have been on edge ahead of Wednesday’s Federal Reserve meeting, with any hawkish signals from the central bank presenting more headwinds for crude demand.

Fears of higher-for-longer U.S. interest rates have weighed on oil prices in recent months, somewhat offsetting a boost from tighter supplies. While U.S. fuel demand has remained steady despite higher rates, traders fear that this could change in the coming months.

The Fed is widely expected to keep rates on hold this week. But officials have still kept the door open for one more rate hike this year, especially following several hotter-than-expected inflation readings.

There will also be policy-setting meetings from the Bank of Japan and