London, Feb. 21, 2024 – Oil prices extended losses from the previous session on Wednesday as growing expectations that cuts to U.S. interest rates will take longer than thought outweighed ongoing concerns over attacks on shipping in the Red Sea.
Brent crude futures fell by 41 cents, or 0.5% to $81.93 a barrel by 1223 GMT, while U.S. West Texas Intermediate crude futures (WTI) were lower by 39 cents, or 0.51%, at $76.65.
The Brent and WTI contracts fell from near three-week highs on Tuesday, dropping by 1.5% and 1.4%, respectively.
The premium of front-month April Brent futures over September contracts – known as backwardation, and a sign of a tightly supplied market – hit its highest since Oct. 31 on Monday at $3.64 a barrel, though has since cooled off to around $3.37.
“Oil prices took yesterday as day of correction which was inspired by a lack of any further conflict news from the world’s clash points as markets had to settle on what was bothering the macro world,” PVM analyst John Evans said in a note published on Wednesday morning.
Concerns that rate cuts by the Federal Reserve could take longer than thought have weighed on the outlook for oil demand. U.S. inflation data last week pushed back expectations for an imminent start to the Fed’s easing cycle, with economists polled by Reuters now forecasting a cut in June.
“Investors yet again felt a hiccup in pivot prediction as to when the most important central bank of all, the Fed, might alter course,” Evans added.
Minutes from the Fed’s January monetary policy meeting, due at 1900 GMT, will offer further clues on the timing of potential interest rate cuts.
But Houthi attacks on commercial vessels in the Red Sea and Bab al-Mandab strait have continued to stoke concerns over freight flows through the critical waterway. Drone and missile strikes have hit at least four vessels since last Friday.
Diplomacy in the Middle East continues to face setbacks. Washington on Tuesday again vetoed a draft United Nations Security Council resolution on the Israel-Hamas war, blocking a demand for an immediate humanitarian ceasefire. The U.S. is instead pushing for the Security Council to adopt a resolution tying a ceasefire to the release of Israeli hostages by Hamas. (Reuters)
