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Oil Prices Rebound on Inventory Draw, Geopolitical Tensions Offset Rate Hike Worries

21 Mar 2024 , 09:48 AM

Oil prices climbed on Thursday, reversing course after a decline the previous day. This uptick followed a report showing lower U.S. crude and gasoline stockpiles, countering concerns about future demand due to potential extended high-interest rates.

Brent crude for May settlement rose slightly over half a percent, settling at $86.47 per barrel. This came after a 1.6% drop on Wednesday. U.S. West Texas Intermediate (WTI) futures for May delivery also saw a modest increase, following a similar decline the prior day.

The U.S. Energy Information Administration (EIA) surprised markets with its report on Wednesday, revealing a decrease in U.S. crude inventories for the second week in a row. This drop defied analysts’ expectations of a slight rise. Gasoline stockpiles also fell for the seventh consecutive week, suggesting healthy fuel consumption.

These inventory figures bolstered the market after earlier price movements reflected a mixed outlook on potential U.S. Federal Reserve rate cuts this year. While the Fed maintained interest rates, policymakers appeared less confident about their initial plan for three rate cuts in 2024. This could signal higher rates for a longer period, potentially hindering economic growth and dampening future fuel demand.

However, ongoing worries about global oil supplies due to the war in Ukraine continue to support prices. Attacks by Ukrainian drones targeted Russian refineries, taking out a significant portion of the country’s processing capacity. This disruption, combined with production cuts from OPEC (Organization of the Petroleum Exporting Countries), could tighten the market.

Analysts warn that prolonged Russian refinery disruptions might force producers to reduce oil supply due to storage limitations and an inability to export crude.

Related Tags

  • crude oil
  • crude oil demand
  • Crude Oil News
  • Crude oil prices
  • oil
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