Oil Prices Settle Higher as EIA Forecasts Slowing US Production
Traders Cheer Expectations for Slowing US Production
Oil prices settled higher on Tuesday as traders welcomed the forecast for a slowdown in U.S. production. This positive news helped support sentiment on crude, especially following signs of progress toward a new Israel-Hamas ceasefire that could ease geopolitical tensions.
Price Increase in Oil
The price of oil climbed 0.7% to $73.31 a barrel, and the price for oil expiring in April rose 0.8% to $78.69 a barrel.
U.S. Production Expected to Slow in 2024
According to the Energy Information Agency, U.S. production, which has been recovering following a dip in January, is expected to slow from record levels in 2024. The agency cut its forecast for domestic oil output by 120,000 barrels per day to 170,000 bpd.
Higher production from non-OPEC countries, including the U.S., has kept fears about oversupply alive at a time when OPEC’s measures to curb supplies have been underwhelming.
Anticipation for Fresh Supply Data
The forecast for slowing U.S. output comes ahead of the release of crude inventory data from the American Petroleum Institute later Tuesday, as well as a further report from EIA due Wednesday. Analysts anticipate that crude inventories fell by 2.1 million barrels in the week ended Feb. 2.
Potential for Prolonged Gaza Ceasefire
U.S. Secretary of State Antony Blinken suggested that an agreement for a new ceasefire deal to halt the Israel-Hamas war is “possible” following a positive response from Palestinian militant group Hamas. However, Blinken cautioned that there is “still a lot of work to be done.”
The prospect of a ceasefire agreement could help ease geopolitical tensions in the oil-rich Middle East and cool fears about supply disruptions at a time when a pledge from the U.S. to proceed with further retaliatory strikes in the region has stoked concerns about a wider regional conflict.
