Oil prices rise on uncertainty over Gaza ceasefire, OPEC cut; Brent at $83/bbl

Oil prices rose on Tuesday, February 27, as the market focused on uncertainty over a potential Gaza ceasefire and some expectations that the Organization of Petroleum Exporting Countries (OPEC) will extend voluntary supply cuts in March. Mixed signals came from the Middle East as US President Joe Biden said Israel is ready to halt its attacks on Gaza for the Muslim holy month of Ramadan in a ceasefire that could be signed as early as next week. 

Brent crude futures rose 50 cents, or 0.61 per cent, to $83.03 a barrel. US West Texas Intermediate crude futures (WTI) were up 60 cents, or 0.77 per cent, at $78.18. Last week, Brent crude declined about two per cent and WTI fell more than three per cent after a US central bank policymaker indicated interest rate cuts could be delayed by at least two more months.

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a March 19 expiry, was last trading 0.59 per cent higher at 6,504 per bbl, having swung between 6,408 and 6,511 per bbl during the session, against a previous close of 6,466 per barrel.

Also Read: OMC stocks off highs after Russia bans petrol exports for 6 months; IOC, HPCL down 3%

What’s supporting oil prices?

-Comments from Yemen’s Houthi spokesperson also supported oil prices, who said the group’s operations in the Red Sea will stop only when Israeli ‘aggression’ against Gaza ends and the siege is lifted. Houthi missile and drone attacks on international shipping have driven up the cost of transporting energy products and contributed to a tighter market.

-“Concerns around shipping disruptions in the Red Sea have supported a rebound in the price of crude oil overnight,” said Tony Sycamore, an analyst at IG in Sydney. Elsewhere, OPEC will make a decision in March on whether to extend voluntary production cuts to bolster prices.

-“We expect OPEC to announce the rollover of voluntary production quotas, at least until the June Ministerial Meeting, to provide additional support,” Helima Croft, of RBC Capital Markets, said in a note late on Monday.

-Meanwhile, there have been signs that Chinese oil demand could pick up and push prices higher. Also on Tuesday, Russian authorities announced a six-month ban on gasoline exports from March 1 to compensate for rising demand and to allow for refinery maintenance.

-Both oil benchmarks had settled more than one per cent higher on Monday after declines of 2-3 per cent over the previous week as markets factored in a greater likelihood that cuts to interest rates might take longer to come than previously expected.

-Kansas City Federal Reserve Bank President Jeffrey Schmid on Monday signalled that he, like most of his central banking colleagues, is in no rush to cut rates. High borrowing costs typically reduce economic growth and oil demand.

Also Read: OPEC+ to support Brent at $80/bbl; ONGC/Oil India placed well on dividend pay, valuations

Where are prices headed?

Crude oil exhibited significant price volatility and rebounded from its lows amid supply disruptions and a weakened dollar index. The attack on US oil tankers by Iran-backed Houthi rebels increased supply disruptions, bolstering crude oil prices. Concurrently, the weakening dollar index also lent support to crude oil prices, according to analysts.

‘’Russian sanctions amplified US oil exports to European nations, coupled with robust diesel demand from these nations, further supporting crude oil prices. We anticipate crude oil prices to remain volatile in today’s session, with support at $76.50–75.90 and resistance at $77.90-78.60. In terms of INR, crude oil finds support at 6,360-6,270 and resistance at 6,520- 6,590,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.


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Published: 27 Feb 2024, 10:08 PM IST

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