Oil Prices Rise in Asian Trade Amid Ceasefire Negotiations and U.S. Production Focus
Oil prices saw a slight increase in Asian trade on Wednesday as investors awaited official data on U.S. production and inventories later in the day. At the same time, attention remained on ongoing negotiations for a ceasefire in the Israel-Hamas war.
Forecasts for a potential drop in U.S. production from record highs have contributed to a rise in oil prices this week. The market had been reeling from steep losses amid speculation over an end to disruptions in the Middle East.
The softer dollar also provided some relief to oil prices, as the greenback retreated after reaching near three-month highs earlier in the week. The strength in the dollar was driven chiefly by expectations of higher-for-longer U.S. interest rates and had pressured crude prices in recent sessions.
Brent crude oil expiring in April rose 0.3% to $78.85 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 0.4% to $73.63 a barrel by 20:07 ET (01:07 GMT). Both contracts had slumped over 7% each last week.
Gaza Ceasefire in Focus Amid Ceasefire Negotiations
A ceasefire in the Middle East has been a key point of focus for oil markets in recent sessions, especially as media reports indicated that there was some dialogue between Israeli and Hamas leaders over a deal.
Hamas said on Tuesday it had delivered its response for a potential ceasefire deal in Gaza, Reuters reported. The proposed deal could potentially see the release of hostages held by Hamas in return for an extended pause in fighting.
U.S. Secretary of State Antony Blinken is also set to visit Israel and discuss a potential ceasefire later in the day. Blinken said that an agreement was still possible.
The prospect of an Israel-Hamas ceasefire triggered steep losses in oil prices last week, given that potential disruptions in Middle East supplies stemming from the conflict had pointed to tighter oil markets in the coming months.
U.S. Inventories Awaited as EIA Sees Slowing Production
Markets were now awaiting U.S. oil inventory data, due later on Wednesday, which will also include production figures for the past week.
While U.S. production has been recovering steadily from a cold snap in January, the Energy Information Administration said that output will fall sharply from record highs in 2024.
Before January’s dip, U.S. production had surged to a record high of over 13 million barrels per day in 2023. While production is expected to recover in February, it is not expected to cross record highs until at least 2025, the EIA said on Tuesday.
U.S. oil inventories are expected to have grown by 2.1 million barrels in the week to February 2. Data from the Energy Information Administration showed a build of 0.7 million barrels.
High U.S. output has been a key point of contention for oil markets, especially as it largely offset any production cuts by the Organization of Petroleum Exporting Countries. Weaker production in the coming months could bode well for oil prices.