Feb 23 2024: Oil prices declined on Friday following comments from a U.S. Federal Reserve official suggesting a postponement of interest rate cuts for at least two more months. However, signs of robust demand and supply concerns may provide support to prices in the days ahead.
Brent crude futures dipped by 38 cents, or 0.5%, to $83.29 a barrel at 0524 GMT, while U.S. West Texas Intermediate crude futures were down 40 cents, or 0.5%, to $78.21.
Fed Governor Christopher Waller’s statement on Thursday urged policymakers to postpone interest rate cuts to assess whether recent inflation upticks signal a halt in progress towards price stability or are merely temporary disruptions.
Extended periods of higher interest rates typically slow economic growth, potentially dampening oil demand in the world’s leading consumer market. Nonetheless, analysts highlight resilient demand, particularly in the U.S.
ANZ research noted a lower-than-expected increase in U.S. crude oil inventories last week, coupled with a halt in refinery run rate declines, suggesting potential increases in the coming weeks.
JPMorgan’s analysts highlighted a monthly 1.7 million barrels per day (mbd) rise in oil demand through February 21, slightly surpassing the prior week’s 1.6 mbd increase, largely attributed to heightened travel demand in China and Europe.
Oil benchmarks retraced some gains from Thursday following Waller’s comments.
The U.S. central bank has maintained its policy rate within the 5.25%-5.5% range since last July, with most policymakers expressing concerns about rapid policy easing in the latest meeting minutes.
Waller also downplayed fears of recession risks if the Fed delays rate cuts, suggesting the central bank can afford to wait a bit longer.
Oil futures experienced a rise on Thursday amid ongoing tensions in the Red Sea, with Iran-aligned Houthis intensifying attacks near Yemen in solidarity with Palestinians amidst the Gaza conflict.
Meanwhile, Israeli Prime Minister Benjamin Netanyahu’s war cabinet approved participation in truce talks in Paris on Friday, underlining escalating pressure in the Middle East, according to informed sources and Israeli media reports.