Oil prices rose on Tuesday on cautious yet positive comments from a New York Federal Reserve policymaker on the future of interest rate cuts and expectations for a drawdown in U.S. crude inventories.
Brent crude futures were up 77 cents to $85.02 per barrel by 10:45 a.m. EDT (1445 GMT), while U.S. West Texas Intermediate crude futures rose by $1.02 to $81.35 a barrel.
Both benchmarks gained around 2% on Monday, closing at their highest levels since April. Global benchmark Brent has clambered back from an early-June close of $77.52, though remains off its $90 peaks in mid-April.
Prices extended gains on Tuesday after the New York Federal Reserve President John Williams said interest rates will come down gradually over time. He declined to say when the U.S. central bank will kick off its monetary policy easing.
“I think that things are moving in the right direction,” he said when asked if the Fed could see a rate cut in September based on current market conditions. A cut would depend on future data, he also said.
On the supply side, the market will be watching U.S. stockpile data released this week as a key indicator as to whether oil demand is increasing during the summer driving season.
U.S. crude inventories are expected to have fallen by 2.3 million barrels last week, according to analysts polled by Reuters.
The American Petroleum Institute will release its latest report on U.S. oil inventories at 4:30 p.m. EDT, followed by government data at 11:00 a.m. EDT on Thursday, delayed a day due to the Juneteenth holiday. [EIA/S]
Meanwhile, some analysts remained bullish on the price impact of an extension by the OPEC+ group of supply cuts in the near term.
“The latest guidance provided by OPEC+, as well as their unchanged 2.25 million barrels per day demand growth outlook, signals a stagnation in oil supply growth for 2024 and an apparent downside risk to production in 2025,” said Patricio Valdivieso, Rystad Energy vice president and global lead of crude trading analysis.
“It is hard to remain fully bearish when global oil supply growth appears decimated,” he added.
Elsewhere, a Ukrainian drone strike has caused a large fire in a fuel tank at an oil terminal in Russia’s southern port of Azov, according to Russian officials and a Ukrainian intelligence source.
The port of Azov has two oil product terminals. which handled a total of about 220,000 tons of fuel for export during the period from January to May.
The ongoing attacks on Russia’s oil refining complex pose a threat to physical global supply, as well as boosting the risk premium priced into crude futures.
In China, oil refinery output in May slipped 1.8% from year-ago levels, statistics bureau data showed on Monday, as refiners undertook planned maintenance and processing margins were pressured by rising crude costs.
(Reporting by Georgina McCartney in Houston, Paul Carsten in London and Trixie Yap in Singapore; Editing by Marguerita Choy and Jason Neely)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First Published: Jun 18 2024 | 10:39 PM IST