Oil prices steady after sharp decline last week, Brent crude at $77.43 bbl

Oil prices remained steady on Monday, February 5, as a strong U.S. job report which curbed sharp falls last week dampened hopes of swift rate cuts, but a U.S. pledge to continue air strikes in the Middle East kept geopolitical tensions high.

Brent crude futures gained 10 cents, or 0.1%, to $77.43 a barrel by 1420 GMT, while U.S. West Texas Intermediate futures were flat at $72.28 a barrel, according to news agency Reuters.

Both benchmarks ended last week down about 7% after stronger-than-expected U.S. jobs data suggested interest rate cuts could be further out than expected.

What's driving crude oil prices?

• Federal Reserve Chairman Jerome Powell, in a recent interview on Sunday, indicated that the central bank is not inclined to significantly reduce interest rates in March. Powell's remarks followed a notably robust jobs report released on Friday, surpassing expectations by a considerable margin. The labor market demonstrated remarkable strength by adding 353,000 jobs, a figure that exceeded the anticipated 185,000 jobs.
• Meanwhile, prospects for a ceasefire agreement between Israel and Hamas remained uncertain, suggesting that tensions in the oil-producing region are likely to persist. “Hopes of a ceasefire between Israel and Hamas drove some of this weakness. However, for now, a ceasefire does not appear imminent,” analyst was quoted as saying by Reuters.
• Investors continued to approach the situation in the Middle East with caution, especially in light of the U.S. signaling the possibility of additional strikes on Iran-backed groups in the region. This indication followed a lethal attack on U.S. troops in Jordan, further raising concerns about a potential escalation in the Middle East conflict.
• The United States persisted in its efforts against the Houthi forces in Yemen. The Houthis, known for their assaults on shipping vessels, have caused disruptions in global oil trading routes. Despite these challenges, the impact on the oil supply has been relatively minimal. "Oil markets will likely respond by continuing to discount supply disruption risks in the Middle East," Commonwealth Bank commodities analyst Vivek Dhar was quoted as saying by Reuters.
• In a recent incident, two Ukrainian attack drones targeted Russia's largest oil refinery in the southern part of the country on Saturday, according to a source in Kyiv who communicated the information to Reuters. This marks the latest occurrence in a series of extended-range assaults on Russian oil facilities, leading to a decline in Russia's exports of naphtha, a crucial petrochemical feedstock.