Oil prices experienced a setback on Wednesday as concerns over a potential delay in the U.S. interest rate-cutting cycle and a rise in U.S. crude stocks overshadowed the positive impact of news suggesting a potential extension of output cuts by OPEC+.
By 6:14 GMT, Brent crude futures fell 0.39 percent to $83.32 a barrel. Meanwhile, U.S. West Texas Intermediate futures (WTI) also dropped 0.39 percent to $78.56 per barrel.
This decline follows an increase of more than $1 per barrel for both benchmarks on Tuesday, in light of speculations of extended oil output cuts to control oil prices.
OPEC+ output cut extension
Despite the retreat in oil prices, hopes remained high for an extension of voluntary output cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) into the second quarter. Analysts suggest that such a move could potentially tighten the market, bolstering oil prices in the long run.
Surging U.S. crude stocks
On Tuesday, Federal Reserve officials signaled no rush in cutting interest rates. This comes in light of the rising risks of inflation that could stall progress on controlling price pressures or even lead to their increase. Their remarks underscored concern in financial markets that the potential economic benefits of lower rates will be pushed back.
Market sentiment took a hit upon the release of American Petroleum Institute (API) figures. The data indicated an unexpected rise of 8.43 million barrels in U.S. crude stocks for the week ending on February 23. Although gasoline inventories fell by 3.27 million barrels and distillate stocks decreased by 523,000 barrels, the significant surge in crude stocks weighed on market sentiment pushing oil prices downwards.
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Russian gasoline export ban
Further impacting oil prices and market dynamics, Russian authorities announced a six-month ban on gasoline exports starting March 1. The ban aims to address rising domestic demand from consumers and farmers while facilitating planned maintenance of refineries. This move is likely to have implications for global supply dynamics, particularly as markets grapple with uncertainty surrounding OPEC+ output policies and U.S. interest rate cut decisions.
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