Oil prices strengthened some in Asian trading on Wednesday, boosted by concerns about attacks on shipping in the Red Sea and rising expectations that cutting interest rates in the United States will take longer than thought.
Brent crude futures were up 30 cents, or 0.36%, at $82.64 a barrel by 03:24 GMT, while WTI crude futures were up 26 cents, or 0.34%, at $77.3.
Brent and WTI contracts fell 1.5 percent and 1.4 percent, respectively, from nearly three-week highs on Tuesday; The premium on WTI crude futures to the second-month contract more than doubled to $1.71 per barrel; This was the highest level in nearly four months.
This incidence encourages energy companies to sell immediately rather than paying to store products for months to come. Premiums fell to 4 cents per barrel on Wednesday.
Crude futures prices have become relatively ranged and there is a risk premium of at least $6-7 per barrel at current levels. Prices may remain in a range until the next turning point in the Gaza crisis, either as tensions ease through a ceasefire or intensify with the Israeli offensive in Rafah.
The Houthis’ attacks on ships in the Red Sea and Bab al-Mandeb Strait in support of the Palestinians continued to raise concerns about cargo flows. Drone and missile attacks have hit at least four ships since Friday.
As expected, Washington blocked the ceasefire on Tuesday by once again vetoing the United Nations Security Council’s draft resolution on an emergency humanitarian ceasefire in the Israel-Hamas war. The United States is pressuring the Security Council to pass a resolution linking the ceasefire to the release of Israeli hostages by Hamas.
Meanwhile, Russia, which has pledged a 500,000 barrel per day (bpd) production cut as part of a cut package with the Organization of the Petroleum Exporting Countries and its allies (OPEC+), said on Tuesday that, it plans to fill its OPEC+ quota in February despite the decline in oil refining.
Refinery output in Russia has fallen by 7% since the beginning of this year after facilities were damaged by Ukrainian drone strikes, the country’s energy minister said on Tuesday.
Concerns that the Fed’s interest rate cuts will last longer than expected have put pressure on the outlook for oil demand. Inflation data released in the USA last week postponed the expectations that the Fed’s expansion cycle would begin soon. Economists predict a reduction in June at the earliest.
A preliminary survey showed U.S. crude oil inventories increased last week, while distillates and gasoline inventories fell. Analysts estimate crude oil inventories rose by an average of 4.3 million barrels in the week through Feb. 16.
