By Adedapo Adesanya
Oil fell by more than 2 per cent on Friday on a possible interest rate cut delay in the US, as Brent crude futures lost $2.05 or 2.5 per cent to trade at $81.62 a barrel, and the West Texas Intermediate (WTI) crude futures declined by $2.12 or 2.7 per cent to $76.49 per barrel.
According to US Federal Reserve Governor, Mr Christopher Waller, the central bank policymakers should delay the country’s interest rate cuts by at least another couple of months.
The market reacted negatively as this could slow economic growth and curb oil demand.
The US Federal Reserve has held its policy rate steady in a 5.25 per cent to 5.5 per cent range since last July.
This is coming as most central bankers were worried about moving too quickly to ease policy.
Some analysts, however, say demand has remained largely healthy despite the impact of high interest rates, including in the US.
For the week, Brent declined by about 2 per cent and WTI fell more than 3 per cent. However, indications of healthy fuel demand and supply concerns could revive prices in the coming days.
Also, talks of a truce in Gaza were underway in Paris in what appears to be the most serious push in weeks to halt the conflict in Palestine and see Israeli and foreign hostages released.
Ceasefire talks could prompt the market to anticipate an easing of geopolitical tensions, making prices weaker.
However, tensions in the Red Sea continued, with attacks by Iran-backed Houthi militants near Yemen on Thursday forcing more shipping vessels to divert from the trade route.
The Organisation of the Petroleum Exporting Countries and its allies, OPEC+ group has not announced its official Q2 plans, but analysts are betting on the group extending its oil production cuts beyond the first quarter of 2024 into the next quarter.
A new Bloomberg survey revealed on Friday that OPEC+ will be forced to extend the cuts into Q2 2024.
While most of those surveyed feel that OPEC+ is likely to extend their cuts into the next quarter, others feel that OPEC+ may increase their production cuts, after some of its members—including Iraq and Kazakhstan—continued to overproduce in January.
US energy firms this week added the most oil rigs since November, and the most in a month since October 2022, energy services firm Baker Hughes said, adding that the oil rig count, an early indicator of future output, rose by six to 503 this week, and increased by four this month.
Dipo Olowookere