2/23/2024

Oil prices fall after brief rise

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Key points:

  • Decrease by 0.5% – $83.23 per barrel (Brent), decrease by 0.6% – $78.13 per barrel (WTI).
  • The US Federal Reserve has delayed cutting interest rates due to recent inflation.
  • However, healthy demand is expected for the asset, including in the United States.

Oil prices experienced a brief upturn on Friday, only to retreat following the U.S. central bank’s indication that interest rate cuts might be postponed for at least an additional two months. Nonetheless, the potential for a resurgence in prices persists due to indicators of robust fuel demand and ongoing supply concerns.

During Friday morning, Brent crude futures declined by 44 cents, equivalent to a 0.5% decrease, settling at $83.23 per barrel, while U.S. West Texas Intermediate crude futures dropped by 48 cents, or 0.6%, closing at $78.13.

Fed caution

Both benchmarks are concluding the week with decreases, marking a departure from the upward trajectory observed over the past two consecutive weeks.

The policymakers at the U.S. Federal Reserve have made the determination to defer any potential interest rate cuts for a minimum of an additional couple of months. Christopher Waller, the Chairman of the Fed, emphasized on Thursday that officials are in the process of gauging whether the recent surge in inflation signifies a deceleration in the advancement towards price stability or if it is a transitory occurrence.

Oil reserves and demand outlook

Higher interest rates over the longer term could slow economic growth, which could limit oil demand from the world’s largest oil consumer. But some analysts say demand remains generally healthy, including in the United States.

Analysts at research firm ANZ said U.S. crude oil inventories rose more slowly than expected last week, while refinery output ended a period of decline and could rise in the coming weeks.

JPMorgan indicators show oil demand rising 1.7 million barrels per day from the previous month through Feb. 21, analysts said Friday.

What caused the growth the day before

Oil futures rose on Thursday as fighting in the Red Sea continued and the Iran-aligned Houthis stepped up attacks near Yemen to show support for the Palestinians in the Gaza war.

Israeli Prime Minister Benjamin Netanyahu’s military cabinet has cleared diplomats for truce talks in Paris on Friday as pressure grows in the Middle East, according to a source.

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