Oil prices increased on Friday after minutes from the Federal Reserve’s December meeting signaled that inflation was coming under control, and as US Secretary of State Antony Blinken returned to the Middle East to potentially abate growing concerns over a broader war between Israel and Hamas.
Brent crude futures for March delivery advanced 0.81% to $78.21 per barrel, while the US West Texas Intermediate (WTI) crude futures expiring in February gained 1.03% to $72.93 per barrel.
The global and US benchmarks are set to end the first week of 2024 higher and have almost recovered all their losses from the previous session, which turned unstable as the US saw significant weekly fuel inventory builds.
Prices of crude slipped on Thursday after data from the Energy Information Administration (EIA) showed that petrol stocks climbed 10.9 million barrels week-on-week to 237 million barrels, marking their highest surge in over 30 years.
Distillate stocks added 10.1 million barrels last week to 125.9 million barrels, while product supplied for the fuel, a substitute for demand, dropped to its lowest since 1999.
Mideast Tensions, Rate Cut Hopes, Supply Worries Keep Oil Up
The bearish reading from the EIA was offset by geopolitical uncertainties, expectations of the US economy bouncing back on a possible reduction of interest rates, and continued shipping concerns.
Minutes of the Fed meeting in the prior month provided no clear signs of the timing of the interest rate cuts.
Still, the talks suggested that central bank officials are gradually becoming certain of inflation coming under control and further worries about the impact of an extremely tight monetary policy might have on the world’s largest economy.
Lower interest rates bring consumer borrowing costs down, which can help shore up economic growth and oil demand.
Concerns over crude supply also increased following the disclosure of Israeli Defense Minister Yoav Gallant’s plans for the phase of the war in Gaza.
In his plan, Gallant said the Israel Defense Forces (IDF) would take a less intense new battle approach in the northern Gaza Strip while further chasing the Hamas militant group in the south ‘for as long as necessary.’
Grappling with a heated and uncertain situation in the Middle East, Blinken would be making his fourth visit to the region in three months to prevent a broader conflict.
Israeli Prime Minister Benjamin Netanyahu is also seeking a ‘fundamental change’ on the country’s border with Lebanon.
Tensions in the Middle East remained high, with the Houthi rebels detonating a drone boat in the Red Sea and the US military executing retaliatory air strikes on three sites used by Iran-backed forces in Iraq.
