Crude Oil Mixed on Undecided US Interest Rates Move, High Inventories

February 29, 2024
Crude Oil Export Sales

By Adedapo Adesanya

Crude oil futures settled mixed on Wednesday after the US Federal Reserve held firm on its decision to hold off cutting interest rates soon while growing crude stockpiles in the world’s largest producer added further pressure.

Brent crude futures settled 3 cents higher, or up 0.04 per cent at $83.68 a barrel while the US West Texas Intermediate futures (WTI) settled 33 cents lower, or down 0.42 per cent at $78.54.

The market was unsteady over signs that interest rates in the world’s largest economy would remain elevated.

US Federal Reserve Bank of New York President John Williams said that, while inflation pressures have slowed to a notable degree, he is not yet ready to say the central bank has done all it needs to do to get inflation back to the Fed’s 2 per cent target.​

His comment was in line with that of the bank’s Governor, Mrs Michelle Bowman, who said that she was in no rush to cut US interest rates, given continuing inflation risks.

Continued higher rates could dampen economic growth and suppress oil demand.

Also, the US Energy Information Administration (EIA) reported an estimated inventory increase of 4.2 million barrels for the week to February 23.

This compared with a build of 3.5 million barrels for the previous week, which was accompanied by inventory declines in gasoline and middle distillates.

However, the American Petroleum Institute (API) reported an estimated oil inventory build for the week ending February 23. The API said Tuesday that inventories had added a hefty 8.43 million barrels in the week to February 23.

While oil prices trended higher earlier in the day, the EIA’s report reversed the direction as the market remains extra sensitive to US crude oil inventory updates.

This offset the effect of cut expectations from the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ which was reportedly considering extending voluntary oil output cuts into the second quarter likely to halt falling prices.

OPEC+ members collectively decided to cut 2.2 million barrels per day from the group’s production this quarter, although much of that was production cuts that were already in effect, including Saudi Arabia’s 1 million barrels per day voluntary cut, launched in June 2023.

Hostilities in the Middle East provided some support for the market after Hamas called for Palestinians to march to Jerusalem’s Al-Aqsa Mosque at the start of Ramadan, raising the stakes in ongoing negotiations for a truce in Gaza.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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