Oil extends losses as US rate cuts outweigh Middle East concerns

London — Oil prices extended the previous session’s losses on Wednesday as growing expectations that cuts to US interest rates will take longer than thought outweighed concerns about attacks on shipping in the Red Sea.

Brent crude futures fell by 47c, or 0.57%, to $81.87 a barrel by 10.34am GMT, while West Texas Intermediate was down by 48c, or 0.62%, at $76.56.

The Brent and WTI contracts fell from near three-week highs on Tuesday, dropping by 1.5% and 1.4%, respectively.

The premium of front-month April Brent futures over September contracts — a situation known as backwardation, and a sign of a tightly supplied market — hit the highest since October 31 on Monday at $3.64 a barrel, though it has since cooled to about $3.37.

“Oil prices took yesterday [Monday] as a day of correction which was inspired by a lack of any further conflict news from the world’s clash points as markets had to settle on what was bothering the macro world,” PVM analyst John Evans said.

Concerns that rate cuts by the Federal Reserve could take longer than thought have weighed on the outlook for oil demand. US inflation data last week pushed back expectations for an imminent start to the Fed’s easing cycle, with economists surveyed by Reuters now forecasting a cut only in June.

“Investors yet again felt a hiccup in the pivot prediction as to when the most important central bank of all, the Fed, might alter course,” Evans added.

Houthi attacks on commercial vessels in the Red Sea and Bab al-Mandab strait have continued to stoke concerns about freight flows through the critical waterway. Drone and missile strikes have hit at least four vessels since last Friday.

Diplomacy in the Middle East continues to face setbacks. Washington on Tuesday again vetoed a draft UN Security Council resolution on the Israel-Hamas war, blocking a demand for an immediate humanitarian ceasefire. The US is instead pushing for the Security Council to adopt a resolution tying a ceasefire to the release of Israeli hostages by Hamas.


Source: businesslive.co.za