NEW DELHI: Oil prices pulled back in Asia on Wednesday as the prospect of a delay in the U.S. rate-cutting cycle and a rise in U.S. crude stocks offset a boost on Tuesday from news OPEC+ might extend its output cuts.
Brent crude futures fell 49 cents, or 0.6%, to $83.16 a barrel by 0302 GMT, while U.S. West Texas Intermediate futures (WTI) dropped 48 cents to $78.39 a barrel.
On Tuesday, Federal Reserve Governor Michelle Bowman signalled she is in no rush to cut U.S. interest rates, particularly given upside risks to inflation that could stall progress on controlling price pressures or even lead to their resurgence.
Kansas City Federal Reserve Bank President Jeffrey Schmid made similar remarks on Monday. Their remarks underlined concern in financial markets that the potential economic benefits of lower rates will be pushed back.
“There is some profit-taking this morning after the past two sessions recouped the $2 per barrel of Mideast risk premium that crude shed on Friday,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
“It’s a combined response to the weekly U.S. crude stock surge in the API data this morning and continuing hope that a Gaza ceasefire deal will be reached in the next few days,” Hari added.
On Tuesday, U.S. President Biden said under a draft ceasefire proposal Israel has agreed to halt military activities in Gaza for the Muslim holy month of Ramadan. However, Israel and Hamas as well as Qatari mediators all sounded notes of caution about progress towards a truce in Gaza.
U.S. crude stocks rose 8.43 million barrels in the week ended Feb. 23, according to market sources citing American Petroleum Institute (API) figures on Tuesday.
Gasoline inventories fell by 3.27 million barrels, and distillate stocks fell by 523,000 barrels, the data showed.
Brent and WTO futures rose more than $1 per barrel on Tuesday after Reuters reported the Organization of the Petroleum Exporting Countries and allies led by Russia (OPEC+) will consider extending voluntary oil output cuts into the second quarter.
Extending the output cuts into the second quarter is “likely”, one of the OPEC+ sources said. Two said a longer extension to the end of 2024 was possible.
Last November, OPEC+ agreed to voluntary cuts totalling about 2.2 million barrels per day (bpd) for the first quarter this year, led by Saudi Arabia rolling over its own voluntary cut.
Analysts at ANZ Research wrote in a note that such a move by the OPEC+ alliance would likely tighten the market.
Russian authorities announced on Tuesday a six-month ban on gasoline exports from March 1 to compensate for rising demand from consumers and farmers and to allow for planned maintenance of refineries. – Reuters