H.G Markets:

Oil prices in Asia retreated on Wednesday, influenced by the potential delay in the U.S. rate-cutting cycle and an uptick in U.S. crude stocks. Brent crude futures declined by 0.36%, or 30 cents, to reach $83.35 per barrel, while U.S. West Texas Intermediate futures (WTI) dropped by 28 cents to $78.59 per barrel. The market had received a boost on Tuesday from news suggesting that OPEC+ might prolong its output cuts. Federal Reserve Governor Michelle Bowman indicated that she is not in a hurry to reduce U.S. interest rates, especially considering the potential for inflationary pressures that could hinder progress in managing price levels or even lead to a resurgence in inflation. Similarly, Kansas City Federal Reserve Bank President Jeffrey Schmid echoed these sentiments on Monday. Their remarks underscored concerns in financial markets that the anticipated economic advantages of lower rates may be delayed. Vandana Hari, founder of oil market analysis provider Vanda Insights, noted, There is some profit-taking this morning after the past two sessions recouped the $2 per barrel of Mideast risk premium that crude shed on Friday. This reaction is a response to the weekly U.S. crude stock surge in the API data and the ongoing optimism regarding a potential Gaza ceasefire deal in the coming days.

On Tuesday, U.S. President Biden announced that Israel has agreed to suspend military activities in Gaza for the Muslim holy month of Ramadan. However, Israel, Hamas, and Qatari mediators all expressed caution about the progress toward a truce in Gaza. According to market sources citing American Petroleum Institute (API) figures, U.S. crude stocks rose by 8.43 million barrels in the week ended Feb. 23. Gasoline inventories fell by 3.27 million barrels, while distillate stocks dropped by 523,000 barrels.

The positive news on Tuesday that the Organization of the Petroleum Exporting Countries and allies led by Russia (OPEC+) might extend voluntary oil output cuts into the second quarter helped Brent and WTI futures rise by more than $1 per barrel. One OPEC+ source indicated that extending the output cuts into the second quarter is “likely,” while two others suggested that a longer extension to the end of 2024 is possible. Last November, OPEC+ agreed to voluntary cuts of about 2.2 million barrels per day (bpd) for the first quarter of this year, with Saudi Arabia rolling over its own voluntary cut. ANZ Research analysts stated in a note that such a move by the OPEC+ alliance would probably tighten the market. Furthermore, authorities announced a six-month ban on gasoline exports starting from March 1, to meet rising demand from consumers and farmers and to allow for planned refinery maintenance.