Oil reports weekly decline on fading US Fed rate cut hopes; Brent settled 3% lower at $81/bbl

Brent crude futures settled down $2.05, or 2.5 per cent, at $81.62 a barrel, while US West Texas Intermediate crude futures (WTI) were down $2.12, or 2.7 per cent, to $76.49. For the week, Brent declined about two per cent and WTI fell more than three per cent. However, indications of healthy fuel demand and supply concerns could revive prices in the coming days.

Also Read: OPEC+ to support Brent at $80/bbl; ONGC/Oil India placed well on dividend pay, valuations

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a March 19 expiry, last settled 0.05 per cent higher at ₹6,356 per bbl, having swung between ₹6,344 and ₹6,498 per bbl during the session, against a previous close of ₹6,353 per barrel.

What weighed on crude oil prices?

-The Federal Reserve has held its policy rate steady in a 5.25 per cent to 5.5 per cent range since last July. Minutes of its meeting last month show most central bankers were worried about moving too quickly to ease policy. Some analysts, however, say demand has remained largely healthy despite the impact of high interest rates, including in the United States.

-JPMorgan’s demand indicators are showing oil demand rising by 1.7 million barrels per day (bpd) month over month through Feb. 21, its analysts said in a note. “This compares to a 1.6 million bpd increase observed during the prior week, likely benefiting from increased travel demand in China and Europe,” the analysts said.

-Gaza truce talks were underway in Paris in what appears to be the most serious push in weeks to halt the conflict in Palestine and see Israeli and foreign hostages released. Ceasefire talks could prompt the market to anticipate an easing of geopolitical tensions, Tim Evans, an independent oil market analyst, said in a note.

Still, tensions in the Red Sea continued, with attacks by Iran-backed Houthi militants near Yemen on Thursday forcing more shipping vessels to divert from the trade route. US energy firms this week added the most oil rigs since November, and the most in a month since October 2022, said energy services firm Baker Hughes.

Also Read: Fed minutes show officials expressed caution about lowering rates too quickly

Where are prices headed?

Crude oil exhibited notable volatility, experiencing significant gains amidst heightened tensions in the Middle East and favorable US economic data. Ongoing tensions in the Red Sea, fuelled by reported escalations in attacks by Houthi forces on ships in support of Palestine during the Israel-Hamas conflict, contributed to the instability in crude oil prices, according to analysts.

The US Energy Information Administration (EIA) reported a substantial increase in crude oil inventories in the US, rising by 3.5 million barrels compared to an anticipated increase of 3.9 million barrels for the week ending on February 16. 

‘’Despite this surplus, crude oil prices received support, indicating a complex interplay of factors affecting the market. We anticipate continued volatility in crude oil prices. Technical analysis suggests that crude oil has a support level ranging from $77.50 to $76.90, with resistance expected between $78.90 and $79.60. In INR, crude oil is anticipated to find support around ₹6,460 to ₹6,390, with resistance levels at ₹6,590 to ₹6,670,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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Published: 24 Feb 2024, 09:33 PM IST