Oil settles on Mideast stress, gains pared as interest rate cuts pulled back Reuters
Written by Georgina McCartney
HOUSTON (Reuters) – Oil prices rose on Wednesday as a ceasefire in Gaza stalled and investors eyed continued interest ahead of the Federal Reserve’s policy statement at the end of its two-day meeting.
futures were up 81 cents, or 0.99%, at $82.73 a barrel at 1:28 pm EDT (1728 GMT), while US West Texas Intermediate (WTI) crude futures were up 80 cents, or u -1.03%, to $78.70.
Prices fell more than 2% last week after OPEC and its allies said they would end production cuts starting in October.
The Palestinian terror group, Hamas, has proposed many changes, some of which will not work, to the US-backed proposal to end the war with Israel in Gaza, US Secretary of State Antony Blinken said on Wednesday, adding that negotiators are willing to close the gaps.
In a press conference with the prime minister of Qatar in Doha, Blinken said that some of the proposals against Hamas, which has ruled Gaza since 2007, want to amend the terms it accepted in previous negotiations.
The war will still materially affect the global oil supply, but investors are pricing in the risk, driving up crude futures prices.
US consumer price data, published on Wednesday, strengthened expectations of a Fed rate cut in September. The US central bank’s policy announcement is due at 2 pm EDT (1800 GMT) and no change in rates is expected at this time. Fed Chairman Jerome Powell will hold a press conference in about half an hour.
“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, fund manager at IDX Advisors.
Higher borrowing costs tend to dampen economic growth, and can reduce demand for oil.
“The market is holding its breath right now,” said Tim Snyder, chief economist at Matador Economics.
“If Powell speaks outside of what the Fed has published, there could be disagreements in the policy committee about how they view interest rates,” Snyder said.
Elsewhere, the Vice President of the European Central Bank, Luis de Guindos, said that the ECB should move “slowly” in lowering interest rates, due to the high uncertainty about inflation.
Stocks posted an unexpected build last week, rising 3.7 million barrels to 459.7 million barrels, compared with expectations for a draw of 1 million barrels, the Energy Information Administration (EIA) said on Wednesday.
Oil prices rose more than expected, rising by 2.6 million barrels to 233.5 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll of a 900,000-barrel build.
However, for the long 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 supply balance in 2024, predicting a decline in global oil supplies, said Tamas Varga oil trader PVM.
Their reports indicate a moderate drop in prices in the second half of the year, Varga added, with the IEA seeing a larger drop than the other two.
