Oil prices rise on OPEC meet, US signals on interest rate cuts; Brent at $81/bbl

Brent crude futures were up 61 cents at $81.16 a barrel. US West Texas Intermediate crude futures were up 62 cents to $76.47, according to news agency Reuters. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a February 16 expiry, was last trading 0.7 per cent higher at ₹6,357 per bbl, having swung between ₹6,273 and ₹6,387 per bbl during the session, against a previous close of ₹6,313 per barrel.

What’s driving crude oil prices?

-There was limited immediate price impact after sources at Organisation of Petroleum Exporting Countries (OPEC) said the group would decide in March whether or not to extend voluntary oil production cuts in place for the first quarter, after a ministerial panel meeting made no changes to the group’s output policy. OPEC currently has 2.2 million barrels per day (bpd) of voluntary oil production cuts, announced last November.

-Federal Reserve Chair Jerome Powell on Wednesday said interest rates had peaked and would move lower in coming months, with inflation continuing to fall and an expectation of sustained economic growth. Lower interest rates and economic growth help oil demand.

Also Read: OPEC+ sticks with oil production cutbacks for first quarter to prevent surplus amid weak demand

-Powell declined to promise that rate cuts would come as early as the Fed’s March 19-20 meeting, as investors had hoped. The US also released on Thursday data showing worker productivity grew faster than expected in the fourth quarter, keeping unit labour costs contained and giving the Fed another boost in the fight against inflation.

-US manufacturing stabilized in January amid a rebound in new orders, but inflation at the factory gate picked up. The Institute for Supply Management (ISM) said on Thursday that its manufacturing PMI increased to 49.1 last month-beating analysts’ estimates.

-In China, the world’s second-biggest economy, leaders revealed new support measures to help to reduce fallout from the liquidation of property developer Evergrande. Analysts at JPMorgan said they expected China to remain the single largest contributor to global oil demand growth in 2024, forecasting that Chinese demand would increase by 530,000 bpd, having jumped by 1.2 million bpd last year.

-In the Middle East, worries over attacks by Yemen-based Houthi forces on shipping in the Red Sea are driving up costs and disrupting global oil trading. The Houthi group also said it would keep up attacks on U.S. and British warships in what it called acts of self defence.

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Published: 01 Feb 2024, 10:19 PM IST