Oil rises; markets weigh Red Sea attacks, US rate cuts

A flare burns excess natural gas in the Permian Basin in Loving County, Texas, U.S. Nov 23, 2019. Picture taken November 23, 2019. REUTERS/Angus Mordant//File photo

BEIJING  – Oil prices regained some ground in early Asian trade on Wednesday, as investors weighed concerns over output cuts by key producers and attacks on shipping in the Red Sea against dimmed expectations of U.S. rate cuts.

Brent crude futures rose 12 cents, or 0.15 percent, to $82.46 a barrel by 0100 GMT, while U.S. West Texas Intermediate crude futures (WTI) were up 9 cents, or 0.12 percent at $77.13.

The Brent and WTI contracts slipped 1.5 percent and 1.4 percent respectively on Tuesday.

Washington on Tuesday again vetoed a draft United Nations Security Council resolution on the Israel-Hamas war, blocking a demand for an immediate humanitarian ceasefire. The U.S. is instead pushing for the Security Council to adopt a resolution tying a ceasefire to the release of Israeli hostages by Hamas.

READ: US blocks ceasefire call with third UN veto in Israel-Hamas war

Attacks in support of the Palestinians on vessels in the Red Sea and Bab al-Mandab strait by Yemen’s Iran-aligned Houthis have continued to stoke concerns over freight flows through the critical waterway. Drone and missile strikes have hit at least four vessels since Friday.

Oil output cuts

Meanwhile, Russia, which has pledged output cuts of 500,000 barrels per day (bpd) as part of a package of cuts with Organization of Petroleum Exporting Countries and its allies (OPEC+), said on Tuesday that it intends to fulfil its OPEC+ quota in February despite a decline in oil refining.

READ: Oil prices gain after OPEC+ maintains output cuts

Refinery throughput in Russia has fallen by 7 percent since the start of the year, the country’s energy minister said on Tuesday, after facilities were damaged by Ukrainian drone attacks.

Concerns that rate cuts by the Federal Reserve could take longer than thought have weighed on the outlook for oil demand. U.S. inflation data last week pushed back expectations for an imminent start to the Fed’s easing cycle, with economists polled by Reuters now forecasting a cut in June.

U.S. crude inventories were seen up last week, while distillates and gasoline stockpiles were seen dropping, a preliminary Reuters poll showed on Tuesday.

Analysts polled by Reuters estimated on average that crude inventories rose by about 4.3 million barrels in the week to Feb. 16.