In Asian trade on Wednesday, oil prices rebounded as concerns about attacks on ships in the Red Sea emerged. Simultaneously, growing expectations of delayed interest rate cuts in the United States contributed to the positive momentum.
By 0324 GMT, Brent crude futures increased 30 cents to $82.64 per barrel, marking a 0.36% rise. Concurrently, US West Texas Intermediate crude futures (WTI) saw a 0.34% increase, with a rise of 26 cents to $77.3.
On Tuesday, the Brent and WTI contracts experienced a 1.5% and 1.4% decline, respectively, from near three-week highs. This drop occurred as the premium for prompt U.S. crude futures to the second-month contract more than doubled to $1.71 per barrel, reaching its widest level in about four months.
This encourages energy companies to sell now rather than pay to store products for later months. The premiums fell to 4 cents per barrel on Wednesday.
“Crude futures prices have become relatively range-bound, and have at least $6-7 per barrel of risk premium embedded at current levels,” said Vandana Hari. She is the founder of oil market analysis provider Vanda Insights.
Anticipating the next turning point in the Gaza crisis, she predicted that prices would remain range-bound. This could occur through a de-escalation via a ceasefire or an exacerbation caused by Israel’s assault on Rafah.
Yemen’s Iran-aligned Houthis have heightened concerns about freight flows through the critical waterway by launching attacks in support of the Palestinians on vessels in the Red Sea and Bab al-Mandab strait. This has raised alarms over the security of this strategic maritime route. Since Friday, at least four vessels have been hit by drone or missile strikes.
On Tuesday, Washington actively vetoed a draft United Nations Security Council resolution addressing the Israel-Hamas conflict, thereby blocking a plea for an immediate humanitarian ceasefire. This decision emphasizes the U.S. stance against the proposed resolution.The United States advocates for a Security Council resolution that ties a cease-fire to Hamas releasing Israeli hostages.
Meanwhile, Russia, committed to reducing output by 500,000 bpd in collaboration with OPEC+ allies, stated on Tuesday that it plans to meet its quota in February. This determination comes despite a decline in oil refining.
On Tuesday, Russia’s energy minister reported a 7% drop in refinery throughput since the year began. This decline is attributed to facility damage resulting from Ukrainian drone attacks.
Concerns that the Federal Reserve’s rate cuts may take longer than expected have weighed on the outlook for oil demand. The US inflation data from last week has shifted expectations for the Fed’s easing cycle, prompting Reuters economists to forecast a cut in June. This delay follows the release of the inflation data.
According to a preliminary Reuters poll released on Tuesday, U.S. crude inventories increased last week, while distillates and gasoline stockpiles decreased.
Analysts polled by Reuters estimated that crude inventories increased by about 4.3 million barrels in the week ending February 16.
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