OIL prices settled higher on Tuesday as geopolitical tensions continued in the Middle East and eastern Europe, but gains were curtailed as investors reined in expectations for the US Federal Reserve interest rate cuts.
Brent futures settled 77 cents higher or 0.94 per cent at US$82.77 a barrel at 2.30 pm EST (19:32 GMT). US West Texas Intermediate (WTI) crude settled 95 cents higher, or 1.24 per cent, at US$77.87 a barrel.
On Monday, oil prices were near flat after gaining 6 per cent last week, with the conflict in the Middle East keeping prices elevated.
The US rejected Russian President Vladimir Putin’s suggestion of a ceasefire in Ukraine, according to sources.
The rejection “punctuates that there is not really an end game in terms of a ceasefire or a peace deal until Ukraine gets what it wants,” said John Kilduff, partner at New York-based Again Capital. “US sanctions are finally starting to bite as well, and we are seeing various countries backing away from taking Russian supplies.”
Fears of further escalation of the war in the Middle East also stoked worries about the oil supply outlook.
Talks involving the US, Egypt, Israel and Qatar on a Gaza truce ended without a breakthrough as calls grew for Israel to hold back on a planned assault on the southern end of the enclave, crammed with over a million displaced people.
Yemen’s Iran-aligned Houthis have kept up attacks in the Red Sea, claiming solidarity with Palestinians and striking vessels with commercial ties to the US, Britain and Israel.
Indicating tighter supply, the premium of the WTI front-month over the seventh month and 13th month held at a three-month high. The premium of the Brent front-month over the seventh month was at its highest in more than two months.
A US government report showed consumer inflation stayed elevated last month. Fed policymakers are now expected to wait longer before cutting interest rates. This could dampen economic growth and oil demand, and it also boosted the dollar to three-month peaks, which reduces demand for oil among buyers paying in other currencies.
US crude oil inventories rose last week, while fuel stockpiles fell, according to market sources citing American Petroleum Institute figures released late on Tuesday.
The API data showed crude stocks rose 8.52 million barrels in the week ended Feb 9, the sources said on condition of anonymity. Petrol inventories fell 7.23 million barrels, and distillate stocks fell by 4.02 million barrels.
Opec stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025, and raised its economic growth forecasts for both years. The producer group and allies including Russia, known as Opec+, will decide in March whether to extend oil production cuts.
“Our balance sheet suggests that the market will be in surplus in the second quarter of 2024 if the group fails to roll over part of these cuts,” ING analysts said in a note. REUTERS
