Brent crude futures began May trading at $83.4/bbl, before dropping sharply on reports that Hamas leaders in Gaza had accepted a ceasefire agreement, however Israel did not accept the terms of the deal in question. After gaining to $83.9/bbl, Brent fell to a two-month low of $81.4/bbl as Federal Reserve members commented that current measures had not been effective in curbing inflation, cooling the demand outlook. News that OPEC+ producers had exceeded voluntary cuts in April by almost 600,000 barrels per day also weighed on prices, a significant proportion of the agreed 2.2 million bpd restriction. Stronger US PMI data further reduced expectations for a rate cut in the summer, reflected in the EIA’s global demand growth forecast which was reduced to 1.1m bpd. Despite these concerns, renewed geo-political tensions caused prices to rise, as Israel’s operation in Rafah added risk to energy markets, and Houthi rebels continued attacks on ships in the Red Sea, boosting prices to a monthly high of $84.2/bbl. Investors anticipated OPEC+ to extend production cuts into the second half of the year at their June meeting, however a delay and changes of venue- from Vienna, to online, and then Riyadh, caused some doubt. Despite projected supply restrictions, data revised US economic growth to 1.3%, down from the previously projected 1.6% and Brent crude fell to $81.6/bbl at the end of the month on demand concerns and rising supply from outside OPEC+.

The British pound saw a consistent rise against USD during May after beginning the month at $1.249. Weak US PMI data brought expectations of a rate cut closer early in the month, pressuring the dollar. Despite two members voting for an interest rate reduction at the May meeting, one more than the previous meeting, rates remained at their current level. This boosted sterling, which traded at $1.265 mid-month. Governor Andrew Bailey stated that he was “optimistic things were moving in the right direction” on inflation, however April’s figure of 2.3% remained above the BoE 2% target, pushing back expectations for a rate cut. Data released in May showed that the UK economy grew by 0.3% in Q1 2024, emerging from the recession seen in the second half of 2023. The announcement by Rishi Sunak that the UK would be holding a general election on the 4th of July also boosted sterling, after markets now fully expect a cut in September at the earliest due to the political positioning of the Bank of England after previous allegations of political interference. Federal Reserve members stated that they would only consider cutting rates after observing inflation fall to an “acceptable” level for an extended period of time, boosting USD, however the pound finished strongly at $1.273, a 2% rise across the month.

May began with the news that Hamas leaders had accepted a ceasefire deal in Gaza after US and UN-led negotiations in Cairo, easing the geo-political risk premium on oil products. However, it quickly transpired that it was a deal which Israel would not agree to, and the IDF continued to prepare for a ground offensive in Rafah, near the Egyptian border. Despite US warnings that weapons supply would be limited if Israel pursued an operation in the city, President Netanyahu continued towards the end of the month, with the military capturing key targets and concerns over civilian deaths were raised by foreign actors. Elsewhere, Russia launched an attack on Kharkiv, Ukraine’s second-largest city, sparking renewed focus on the conflict. President Zelenskiy has launched a plea for Western leaders to attend a “peace summit” on the war next month in Switzerland. In retaliation, Ukrainian drone strikes on Russian oil and gas infrastructure has impacted energy markets and ground fighting in the region has been successful thus far.