Oil prices experienced a rebound on Wednesday, partially fueled by escalating concerns over shipping in the Red Sea. Recent tensions in the Red Sea and Bab al-Mandab strait have intensified worries regarding freight flows through these crucial waterways. The geopolitical instability in the region has added a risk premium to oil prices, pushing them higher amidst already volatile conditions.
By 7:37 GMT, Brent crude futures saw a 0.30 percent increase to $82.58 per barrel. Meanwhile, U.S. West Texas Intermediate crude futures (WTI) saw a 0.27 percent increase to $77.25 per barrel.
Fed policy uncertainty
Growing expectations that cuts to U.S. interest rates will take longer than initially anticipated have contributed to market uncertainty. Thus, concerns over the Federal Reserve‘s monetary policy have weighed on the outlook for oil demand, impacting oil prices and their movements.
Russia’s output cuts
Despite facing setbacks in oil refining, Russia has reaffirmed its commitment to output cuts as part of the agreement with the Organization of Petroleum Exporting Countries and its allies (OPEC+) to control oil prices. Refinery throughput in Russia has declined by 7 percent since the beginning of the year, highlighting the challenges geopolitical conflicts pose on oil-producing nations.
Read: Gold prices increase amid Fed rate cut speculation
Inventory data
Preliminary polls by Reuters news agency suggest that U.S. crude inventories were expected to rise last week, while distillates and gasoline stockpiles were projected to decrease. Analysts estimated on average that crude inventories rose by about 4.3 million barrels in the week to February 16, indicating potential supply-side pressures that could impact future oil prices.
As oil prices face significant risk premiums, market participants are closely monitoring geopolitical developments and Fed policy decisions for signals of future market direction. The combination of geopolitical tensions, Fed policy uncertainty, and supply-side dynamics underscores the complex interplay shaping oil market dynamics in the near term.
For more news on markets, click here.
