Oil prices fell Thursday as traders monitored efforts to negotiate a cease-fire in the Israel-Hamas war.
The West Texas Intermediate contract for March fell $2.03, or 2.68%, to settle at $73.82 a barrel. The Brent contract for April fell $1.85, or 2.30%, to settle at $78.70 a barrel.
The benchmarks had risen more than 1% earlier in the session as the market digested the outcome of an OPEC committee meeting and the Federal Reserve's decision on interest rates.
The OPEC committee said Thursday the group's members were adhering to production cuts after reviewing data from November and December of 2023. The committee proposed no change to OPEC's decision to slash 2.2 million barrels per day from the market this quarter.
The Federal Reserve on Wednesday held benchmark interest rates steady and indicated that rates had likely topped out. Lower interest rates typical boost economic growth which buoys oil demand. Chairman Jerome Powell, however, indicated that rate cuts are unlikely to come in March.
"Any kicker that investors were seeking from Jerome Powell's post-FOMC, unchanged rate decision, was sadly lacking," wrote John Evans with oil broker PVM in a note Thursday. "Still, Powell's language implies that the market is likely to get interest rate relief at some point this year."
Oil posted its first monthly gain since September in January on stronger than expected economic growth in the U.S., a disruption to U.S. output due to winter storms, and stimulus in China.
The U.S. and Iran are also on the brink of a more direct confrontation in the Middle East after a drone strike by militants allied with Tehran killed three U.S. troops in Jordan last weekend.
Anxiety about China's economy has weighed on the market over the past several months, but JPMorgan is forecasting growth of 4.9% this year as Beijing ramps up stimulus. There are few signs that China's oil demand is slowing, according to Natasha Kaneva, head of global commodities strategy at the investment bank.
"Geopolitics aside, our view remains that 2024 will be fundamentally a healthy year for the oil market and we recommended using Decembers sell-off as a buying opportunity," Kaneva told clients in a Wednesday research note.
"We believe the lows are behind us and continue to see Brent oil trading in high $80s by May with a distinct possibility of crude overshooting our price target to the upside," Kaneva wrote.