ISLAMABAD
Oil futures posted a weekly decline of up to over 3 percent as uncertainty over US interest rate cuts swirled after the central bank policymaker indicated that interest rate cuts could be delayed by at least two more months.
Major global benchmark Brent ended the week lower by 2.22 percent. Brent, the international benchmark for two-thirds of the world’s oil, fell to $81.62 a barrel from $83.47 a barrel during the week under review, showing a decrease of $1.85 on a week-on-week (WoW) basis.
Other global benchmark West Texas Intermediate (WTI), the main oil benchmark for North America, also closed the week lower to $76.49 from $79.19 a barrel, registering a weekly decrease of $2.70 (-3.41 percent).
The US Federal Reserve officials are generally unsure about when they will begin cutting interest rates, although most warned against starting too soon, the minutes from their January 30-31 meeting showed. “Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained,” the Federal Open Market Committee’s minutes read.
The Fed kept its target rate unchanged between 5.25pc and 5.50pc, and suggested rates had reached their peak, leading markets and borrowers to question how long they will remain elevated. Lower interest rates support economic growth, which fuels crude oil demand.
Indications of healthy fuel demand and supply concerns could revive prices in the coming days. JPMorgan’s demand indicators are showing oil demand rising by 1.7 million barrels per day (bpd) month over month through February 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.
Meanwhile, US crude inventories, an indicator of fuel demand, rose by 3.5 million barrels in the week that ended on February 16, according to the US Energy Information Administration. Petroleum stocks fell by 300,000 barrels last week, while distillate inventories dropped by 4 million barrels, the EIA data showed.
On the other hand, 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. 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. Attacks on commercial ships in the Red Sea by Yemen’s Houthi rebels have added to the risk premium for oil futures.
The Opec+ alliance, which includes Russia, has implemented voluntary supply cuts of 2.2 million barrels per day until the end of the first quarter. This reduction is in addition to the 3.6 million bpd of output reductions agreed upon earlier. The production of Opec’s 12 member countries decreased by 350,000 bpd from December to 26.24 million bpd, the group said in its February oil market report.
