OIL prices settled at their highest levels since late October on Wednesday (Apr 3) as investors worried about supply disruptions from a worsening geopolitical landscape, although a jump in US crude oil inventories eased some of those concerns.
Brent futures rose 43 US cents, or 0.5 per cent, to settle at US$89.35 a barrel, and US West Texas Intermediate (WTI) futures gained 28 US cents, or 0.3 per cent, to US$85.43 a barrel.
Both contracts were up more than a US dollar during the session, but pulled back after the US Energy Information Administration (EIA) reported crude stocks increased by 3.2 million barrels.
Analysts polled by Reuters had expected a decrease of more than 1.5 million barrels, in line with data reported by the American Petroleum Institute (API) on Tuesday.
“The EIA report went in the other direction on crude oil from what the API reported yesterday, so that has helped pause the rally a little bit,” said Bob Yawger, director of energy futures at Mizuho.
Technical indicators also pressured prices, signalling oil futures were overbought.
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“We needed a little bit of a pullback to reload before gunning higher again. Other than being overbought, market fundamentals continue to point upwards,” he said.
Brent and WTI futures have hit five-month intraday highs for three consecutive sessions, lifted by concerns that oil supplies could tighten due to Ukraine’s attacks on Russian refineries and a potential widening of the conflict in the Middle East.
Iran, which provides support for the Hamas militia fighting Israel in the Gaza Strip, has vowed revenge against Israel for an attack on Monday that killed high-ranking military personnel. Iran is the third-largest producer in the Organization of the Petroleum Exporting Countries (Opec).
Oil markets are figuring out how to price in these developments and for how long, alongside strong economic data from US and China and expectations of declining US crude output, said Angie Gildea, the US national sector lead for energy, natural resources and chemicals at KPMG.
Federal Reserve chair Jerome Powell stuck with a cautious approach to the US central bank’s policy on interest rate cuts, indicating the need for more debate and data before a decision could be made on when to start the monetary policy easing.
The comments offered some support for oil demand growth as they seem to affirm solid US economic growth expectations, said Rob Haworth, senior investment strategist for US Bank’s asset management group.
Bank of America Global Research raised its 2024 Brent and WTI forecasts to US$86 and US$81 a barrel, respectively, it said in a note.
The US Department of Energy said on Wednesday it will not award oil supply contracts for refilling the Strategic Petroleum Reserve in August and September due to high prices.
Meanwhile, a meeting of top Opec+ ministers kept oil output policy unchanged and pressed some countries to boost compliance with output cuts. REUTERS
