Oil up as Mideast tensions boost risk factor

GLOBAL-OIL:Oil up as Mideast tensions boost risk factor

Reuters
First Published12 Jun 2024, 11:34 PM IST
Oil up as Mideast tensions boost risk factor
Oil up as Mideast tensions boost risk factor

By Georgina McCartney

HOUSTON (Reuters) -Oil prices rose on Wednesday as a Gaza ceasefire hung in the balance and investors eyed steady interest rates in advance of the Federal Reserve's policy statement at the close of its two-day meeting.

Brent crude futures were up 81 cents, or 0.99%, to $82.73 a barrel at 1:28 p.m. EDT (1728 GMT), with U.S. West Texas Intermediate (WTI) crude futures up 80 cents, or 1.03%, to $78.70.

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.

U.S. consumer price data, published on Wednesday, reinforced expectations of a Fed rate cut in September. The U.S. central bank's policy announcement is due at 2 p.m. EDT (1800 GMT) with no change in rates expected for now. Fed Chair Jerome Powell will hold a press conference about a half hour later.

"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.​

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, said Tamas Varga of oil broker PVM.

Their reports imply limited downside for prices in the second half of the year, Varga added, with the IEA seeing a larger depletion than the other two.

(Reporting by Georgina McCartney in Houston, Natalie Grover in London, Arathy Somasekhar in Houston and Emily Chow in Singapore; Editing by Mark Potter, Emelia Sithole-Matarise, Kirsten Donovan, Tomasz Janowski and Leslie Adler)

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First Published:12 Jun 2024, 11:34 PM IST
HomeNewsOil up as Mideast tensions boost risk factor

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