February 21, 2024 (MLN): Oil prices edged higher on Wednesday after falling over 1% in yesterday’s session due to concerns of rising expectations that cuts to U.S. interest rates will take longer than thought.
Brent crude is currently trading at $81.86 per barrel, up by 0.09% on the day.
While West Texas Intermediate crude (WTI) is trading at $77.15 per barrel, up by 0.10% on the day.
It is important to highlight here that both benchmarks surged last week with a gain of over 1.3% driven by a dollar sell-off and persisted tensions in the Middle East.
That encourages energy companies to sell now rather than paying to store products for future months. The premiums slid to 4 cents a barrel on Wednesday, as Reuters reported.
"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, founder of oil market analysis provider Vanda Insights.
She said prices could remain range-bound until the next turning point in the Gaza crisis, whether that be a de-escalation through a ceasefire or an exacerbation by Israel's onslaught in Rafah.
Attacks in support of the Palestinians on vessels in the Red Sea and Bab al-Mandab strait by Yemen's Iran-aligned Houthis have continued to stoke concerns over freight flows through the critical waterway. Drone and missile strikes have hit at least four vessels since Friday.
Washington on Tuesday again vetoed a draft United Nations Security Council resolution on the Israel-Hamas war, blocking a demand for an immediate humanitarian ceasefire.
The U.S. is instead pushing for the Security Council to adopt a resolution tying a ceasefire to the release of Israeli hostages by Hamas.
Meanwhile, Russia, which has pledged output cuts of 500,000 barrels per day (bpd) as part of a package of cuts with Organisation of Petroleum Exporting Countries and its allies (OPEC+), said on Tuesday that it intends to fulfil its OPEC+ quota in February despite a decline in oil refining.
Refinery throughput in Russia has fallen by 7% since the start of the year, the country's energy minister said on Tuesday, after facilities were damaged by Ukrainian drone attacks.
Concerns that rate cuts by the Federal Reserve could take longer than thought have weighed on the outlook for oil demand. U.S. inflation data last week pushed back expectations for an imminent start to the Fed's easing cycle.
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Posted on: 2024-02-21T11:45:54+05:00
