Oil Prices Fall 1% On Fed Rate Cut Caution
Oil prices pulled back on Wednesday as the prospect of delays to US interest rate cuts and a jump in US crude stocks that trounced expectations offset a boost from a potential extension to OPEC+ supply curbs.
Brent crude futures fell 76 cents, or 0.91 per cent to USD 82.89 a barrel by 1227 GMT. US West Texas Intermediate futures (WTI) were down 83 cents, or 1.05 per cent at USD 78.04. Both benchmarks had fallen USD 1 in earlier trading.
Vandana Hari, founder of oil market analysis provider Vanda Insights, attributed the price falls to profit-taking plus a combined response to a surge in US crude stocks and continuing hopes of a Gaza ceasefire deal in the coming days.
US crude stocks showed an 8.43 million barrel build in the week ended 23 February, according to market sources citing American Petroleum Institute (API) figures on Tuesday.
That shattered expectations of a 1.8 million barrel build, according to analysts polled by Reuters on Monday.
Federal Reserve Governor Michelle Bowman had signalled on Tuesday that she was in no rush to cut US interest rates, particularly given continuing inflation risks. Higher-for-longer rates could dampen economic growth and suppress oil demand.
Due Thursday is the January US personal consumption expenditures (PCE) price index, the Fed's preferred measure of inflation and a key factor in rate decisions.
"The power of inflationary expectations must not be underestimated," said Tamas Varga of oil broker PVM in a note on Wednesday. "In case tomorrow's US PCE reading comes in above expectations, a temporary top might have been found" for oil.
Brent and WTI futures rose more than USD 1 a barrel on Tuesday after Reuters reported that the Organisation of the Petroleum Exporting Countries and allies led by Russia (OPEC+) will consider extending voluntary oil output cuts into the second quarter.
Analysts at ANZ Research said that such a move by OPEC+ would be likely to tighten the market.
Russian authorities on Tuesday announced a six-month ban on gasoline exports from 1 March to compensate for rising demand from consumers and farmers and to allow for planned refinery maintenance.
(REUTERS)
