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Oil prices snap 2-week win streak as demand concerns linger

Published 23/02/2024, 01:10 pm
Updated 24/02/2024, 07:10 am
© Reuters. Oil prices settled lower Friday, snapping a two-week win streak amid fresh concerns that higher for longer U.S. interest rate regime will stifle global growth and crude demand.  

By 14:30 ET (19.30 GMT), the U.S. crude futures fell 2.7% to settle $76.49 a barrel and the Brent contract dropped 2.3% to $81.71 a barrel.

A string of weak economic readings from across the globe spurred more concerns over slowing demand, especially after data released last week showed the U.K. and Japan both entering recessions in the fourth quarter.

Expectations of higher-for-longer U.S. interest rates also weighed on the outlook for crude demand, as several signals from the Federal Reserve showed the bank was in no hurry to begin trimming interest rates. 

Hawkish Fed signals weigh 

Federal Reserve Governor Christopher Waller reiterated the chorus of higher for longer interest rates from several Fed officials this week, saying Thursday that central bank should delay its first rate cut by at least a couple more months to see if a recent uptick in inflation signals stalling progress toward price stability.

Investors continued to push back their bets on sooner rate cuts, with Goldman Sachs (NYSE:GS) becoming the latest bank to say that they no longer think the U.S. Federal Reserve will move to slash interest rates at its policy meeting in May.

The higher for longer interest rate regime is expected to keep a lid on economic growth, potentially weighing on crude demand. 

Rig counts expand in latest week

The number of oil rigs operating in the U.S. rose by 5 to 503, the first decline in ten weeks, from 236 last week, according to data from energy services firm Baker Hughes, marking the first increase in nearly one month, as activity continues to recover following a hit from adverse weather. 

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The uptick in rig count comes as expectations of strong growth from the US shale industry are also waning, ANZ Research said in a Thursday note, though added the "number of horizontal drill rigs operating in shale oil basins is not sufficient to replace dry wells in coming months."

Official data on Thursday, meanwhile, showed U.S. oil inventories grew less than expected in the week to Feb. 16, stoking hopes of tightening domestic supplies. 

Middle East tensions continue despite fresh hope for Gaza ceasfire

The conflict in the Middle East showed little signs of stopping as attacks by Houthi rebels continued in the Red Sea, but fresh hope for Gaza ceasefire emerged as Israel Prime Minister Benjamin Netanyahu's war cabinet approved sending negotiators to truce talks taking place in Paris on Friday.

The meeting comes as pressure mounts on Hamas and Israel to agree a deal on a ceasefire amid threats by the latter to begin a ground offensive in Rafa in southern city of Gaza.  


(Peter Nurse, Ambar Warrick contributed to this article.)

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