Investing.com — Oil prices rose in Asian trade on Thursday as Middle East supply concerns persisted as military action intensified in the Red Sea, but hopes for an OPEC+ meeting also kept traders wary. Ta.
Markets were also digesting the prospect of a prolonged rise in U.S. interest rates after expectations for a rate cut in March faded.
The move comes just one day after a deadly drone attack on a US military base in Jordan, with the US targeting several unmanned drones preparing to launch in western Yemen, according to media reports.
The attack shows little progress has been made in the escalation of the Middle East conflict, and has raised concerns that shipping routes through the Red Sea could be disrupted and oil supplies delayed in Europe and Asia.
Concerns about supply disruptions provided key support for oil prices in January, allowing oil prices to break a three-month streak of decline.
April expiry prices rose 0.6% to $81.03 per barrel and were up 0.6% to $76.18 per barrel by 8:34 pm ET.
Both contracts rose 4-5% in January.
Uncertainty about interest rate cuts and weak Chinese economy weigh on crude oil prices
A strong rebound in oil prices since the beginning of the year has been tempered by the Fed’s decision to say there is no rush to start cutting rates.
Federal Reserve Chairman Jerome Powell has warned against the continued resilience of the U.S. economy, but the prospect of higher interest rates for an extended period of time still bodes badly for demand in the world’s biggest fuel consumer.
The dollar rebounded following Powell’s comments, weighing on oil prices.
Weak economic data from China is also contributing to concerns about slowing demand in the world’s largest oil importer.
Official Purchasing Managers Index data for January continued to show contraction, showing little improvement in the slow economic recovery.
On the supply side, data showing an unexpected increase in the U.S. also showed that U.S. production is recovering from a cold snap in early January that disrupted production in some parts of the country. US domestic oil production was also seen returning to record levels from the previous week.
OPEC+ meeting as scheduled, no changes expected
The Organization of Petroleum Exporting and Allied Countries (OPEC+) is scheduled to take up membership in the Joint Ministerial Oversight Committee later in the day, the bloc’s first major meeting in 2024.
However, Reuters said the meeting is unlikely to result in any changes to production.
OPEC+’s overwhelming production cuts in the second half of 2023 indicate the market will be less tight in 2024 than initially expected, and have become a major point of contention for oil prices.
The cartel also currently appears to have limited capacity to further reduce production to support oil prices.