Oil prices are poised to conclude a two-week winning streak after the U.S. Federal Reserve suggested that interest rate cuts might be postponed by at least two more months. However, indications of robust fuel demand and ongoing supply concerns could revive prices in the coming days.
As of 0524 GMT on Friday, Brent crude futures were down 44 cents, or 0.5%, at $83.23 a barrel, while U.S. West Texas Intermediate crude futures were 48 cents, or 0.6%, lower at $78.13. Both benchmarks are heading for a weekly decline after enjoying two consecutive weeks of gains.
Fed Governor Christopher Waller recommended a delay in interest rate cuts for a few more months to assess whether the recent uptick in inflation signifies a slowdown in progress toward price stability or is merely a temporary hurdle. The possibility of higher interest rates for an extended period could potentially dampen economic growth and impact oil demand in the largest consumer, the United States. However, some analysts argue that overall demand remains robust, including in the U.S.
ANZ research analysts reported that U.S. crude oil inventories increased at a lower-than-expected rate last week, while refinery run rates, which had been declining, saw a potential upturn in the coming weeks.
JPMorgan’s high-frequency demand indicators revealed a month-over-month increase of 1.7 million barrels per day through February 21, according to analysts, indicating healthy demand. They noted a rise in travel demand in China and Europe, contributing to the positive trend.
Oil benchmarks experienced a pullback in gains after Waller’s comments on Thursday. The U.S. central bank has maintained its policy rate within the 5.25%-5.5% range since last July. The minutes of the recent policy meeting underscored the central bankers’ concerns about moving too hastily to ease policy.
Despite the uncertainties, oil futures settled higher on Thursday due to ongoing hostilities in the Red Sea, with Iran-aligned Houthis intensifying attacks near Yemen in solidarity with Palestinians in the Gaza war. Israel Prime Minister Benjamin Netanyahu’s war cabinet approved sending negotiators to truce talks in Paris, signaling diplomatic efforts amid rising tensions in the Middle East.
