Oil Stalls at Top of Year’s Range on War Risks, Rate Outlook
(Bloomberg) — Oil was little changed as traders weighed increasing tensions in the Middle East against hotter-than-expected US inflation data that’s damping the prospect of interest rate cuts.
Most Read from Bloomberg
West Texas Intermediate rebounded from an earlier drop to hold near $78 a barrel after Hezbollah chief Hassan Nasrallah said the group will escalate its fight with Israel, heightening risks in a region that accounts for about a third of the world’s oil output. Meanwhile, wider markets struck a more cautious tone as inflation figures spurred bets that the Federal Reserve will be in no rush to cut interest rates.
Apart from the conflict, the fundamental outlook for crude remains mixed. The International Energy Agency said this week that oil markets could be in surplus all year as global demand growth loses steam, while OPEC sees more robust consumption and the cartel and its allies are implementing supply cuts to buttress prices. Crude is up about 9% this year, near the top of a range it has traded in since early November.
“While the geopolitical risks remain elevated, no real supply loss is noted other than Russian exports being curtailed by tighter sanctions,” said Dennis Kissler, senior vice president at BOK Financial. “Most traders are leaning more towards OPEC’s predictions since they still hold most of the control and can simply reduce production.”
In the Middle East, exchanges of fire between Hezbollah in Lebanon and Israel intensified in a further escalation that’s raising alarm of a wider war. Security in the Red Sea continues deteriorate as swaths of the merchant fleet have been avoiding the waterway since attacks by the Houthis began in mid-November.
Meanwhile, Russia almost reached its target for voluntary supply reductions for the first time since making the pledge last year, according to Bloomberg calculations based on official data for January. Elsewhere, Iraq and Kazakhstan have pledged compliance with their targets after failing to fully cut production as promised last month.
To get Bloomberg’s Energy Daily newsletter into your inbox, click here.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
Source link