Oil prices retreats due to stalled US Fed rate cuts, Brent drops 1% to $82/bbl

On Wednesday, February 28, oil prices declined as anticipation for a likely extension of the Organization of Petroleum Exporting Countries’ (OPEC) production limitations were countered by the possibility of delays to US interest rate cuts and a spike in US crude storage.

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On Wednesday, February 28, oil prices declined as anticipation for a likely extension of the Organization of Petroleum Exporting Countries’ (OPEC) production limitations were countered by the possibility of delays to US interest rate cuts and a spike in US crude storage.

The price of a barrel of Brent crude futures dropped by 76 cents, or 0.91 percent. US West Texas Intermediate (WTI) futures were trading at $78.04, down 83 cents, or 1.05 percent. Reuters reported that in previous trading, both benchmarks had dropped $1.

Crude oil futures scheduled for a March 19 expiry on the Multi Commodity Exchange (MCX) were last trading 0.52 percent down at ₹6,495 per barrel. The price had fluctuated between ₹6,456 and ₹6,598 per barrel.

What influences the price of oil?

Crude oil prices expected to stay low in early 2024 due to weak demand: Analysts

-Analysts ascribed the price declines to profit-taking in addition to a joint reaction to a spike in US crude inventories and ongoing expectations of a ceasefire agreement in Gaza in the upcoming days. According to data from the American Petroleum Institute, US oil stockpiles increased by 8.43 million barrels during the week that concluded on February 23.

-On Tuesday, Federal Reserve Governor Michelle Bowman gave notice that, given the ongoing concerns of inflation, she was not in a haste to lower US interest rates. Higher rates for longer periods of time may impede economic expansion and reduce the demand for oil.

-The US economy expanded at a strong annual rate of 3.2% from October to December, driven by strong consumer spending, according to a report released by the Commerce Department on Wednesday. This estimate was somewhat lower than what was first projected.

-According to US government data, the growth in the country’s gross domestic product (GDP), or the total production of goods and services produced by the economy, decreased from 4.9% in July to September.

-The GDP figures for the fourth quarter were revised downward from the 3.3% pace that Commerce had previously announced last month. Over the last six quarters, US growth has exceeded two percent, dispelling concerns that the world’s largest economy will enter a recession due to elevated interest rates.

-Russian authorities on Tuesday declared a six-month gasoline export restriction, effective March 1, to meet growing consumer and agricultural demand and to accommodate scheduled refinery maintenance.

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