Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Oil settles up on Mideast tension, gains curbed as interest rate cuts pushed back

Published 2024-06-11, 08:33 p/m
© Reuters. The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant/File Photo

By Georgina McCartney

HOUSTON (Reuters) -Oil settled higher on Wednesday as ongoing tensions in the Middle East lent support to prices, but news that interest rate cuts could start as late as December capped gains, following the Federal Reserve's statement concluding its two-day meeting.

Brent crude futures settled 68 cents, or 0.83%, higher at $82.60 a barrel, with U.S. West Texas Intermediate (WTI) crude futures up 60 cents, or 0.77%, to $78.50.

Prices had eased more than 2% last week after OPEC and its allies said they would phase out output cuts starting from October.

Palestinian militant group Hamas has proposed numerous changes, some unworkable, to a U.S.-backed proposal for a ceasefire with Israel in Gaza, U.S. Secretary of State Antony Blinken said on Wednesday, adding that mediators were determined to close the gaps.

At a press conference with Qatar's prime minister in Doha, Blinken said some of the counter-proposals from Hamas, which has ruled Gaza since 2007, had sought to amend terms that it had accepted in previous talks.

The war has yet to materially affect global oil supply, but investors have priced in the risk, boosting crude futures prices.

Meanwhile, investors were left disappointed after the Federal Reserve pushed out the start of rate cuts to perhaps as late as December, with officials projecting only a single quarter-percentage-point reduction for the year amid rising estimates for what it will take to keep inflation in check.

U.S. consumer price data, published on Wednesday, had reinforced expectations of a Fed rate cut in September. Fed Chair Jerome Powell will hold a press conference later on Wednesday.

"It will be interesting to see what Powell says, I don’t think there is any doubt that they will leave rates where they are," said Ben McMillan, a fund manager for IDX Advisors.

Higher borrowing costs tend to dampen economic growth, and could, by extension, limit oil demand.

"The market is holding its breath right now," said Tim Snyder, economist at Matador Economics.

"If Powell talks outside of what the Fed publishes, there could be a little discord within the policy committee as to their direction on interest rates," Snyder added.

Elsewhere, European Central Bank Vice President Luis de Guindos said the ECB must move "very slowly" in reducing interest rates, because of huge uncertainty over the inflation outlook.

U.S. crude stocks posted a surprise build last week, up by 3.7 million barrels to 459.7 million barrels, compared with expectations of a 1 million barrel-draw, the Energy Information Administration (EIA) said on Wednesday.

Gasoline stocks rose more than expected, up by 2.6 million barrels to 233.5 million barrels, the EIA said, compared with analysts' expectations in a Reuters poll for a 900,000-barrel build.​

© Reuters. The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant/File Photo

However, longer term, the EIA, the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries this week updated their views on the global oil demand-supply balance for 2024, predicting declines in global oil inventories.

Their reports imply limited downside for prices in the second half of the year, said Tamas Varga of oil broker PVM, with the IEA seeing a larger depletion in inventories than the other two.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.