Oil prices dipped on Friday and were relatively unchanged from a week ago as uncertainty over US interest rate cuts swirled.
Brent, the benchmark for two thirds of the world’s oil, dipped 2.05 per cent to close at $81.62 a barrel on Friday. West Texas Intermediate, the gauge that tracks US crude, dropped 2.12 per cent to close at $76.49 a barrel.
On Thursday, Brent settled 0.77 per cent higher at $83.67 a barrel. WTI closed 0.90 per cent higher at $78.61.
US Federal Reserve officials are generally unsure about when they will begin cutting interest rates, although most warned against starting too soon, the minutes from their January 30-31 meeting showed.
“Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained,” the Federal Open Market Committee's minutes read.
The Fed kept its target rate unchanged between 5.25 and 5.50 per cent when it last met, and suggested rates had reached their peak, leading markets and borrowers to question how long they will remain elevated.
Lower interest rates support economic growth, which fuels crude oil demand.
“US economic data continues to surprise to the upside. The Fed rate cut expectations are being scaled back, yet the dollar doesn’t gain the attraction that it deserves,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“That’s a good thing, mind you, to prevent the US inflation from spilling to the rest of the world, but it’s not fully rational,” she added.
Attacks on commercial ships in the Red Sea by Yemen’s Houthi rebels have added to the risk premium for oil futures.
“The futures curve in crude oil prices has become even more strongly downward sloped. Normally, a premium for immediate delivery versus later delivery indicates market tightness,” said Giovanni Staunovo, strategist at UBS.
That could be due to production shut-ins in North America, as well as supply cuts by Opec+ countries, Mr Staunovo said in a research note on Thursday.
The Opec+ alliance, which includes Russia, has implemented voluntary supply cuts of 2.2 million barrels per day until the end of the first quarter. This reduction is in addition to the 3.6 million bpd of output reductions agreed upon earlier.
The production of Opec’s 12 member countries decreased by 350,000 bpd from December to 26.24 million bpd, the group said in its February oil market report.
“We retain a modestly positive outlook as we expect the oil market to remain slightly undersupplied this year,” Mr Staunovo said.
“Hence, we continue to advise investors with a high risk-tolerance to sell Brent’s downside price risks or to add exposure to longer-dated Brent oil contracts,” he added.
Meanwhile, US crude inventories, an indicator of fuel demand, rose by 3.5 million barrels in the week that ended on February 16, according to the US Energy Information Administration.
Analysts polled by Reuters were expecting an increase of 3.9 million barrels.
Petroleum stocks fell by 300,000 barrels last week, while distillate inventories dropped by 4 million barrels, the EIA data showed.
