Oil prices climbed on Friday, heading for a fourth consecutive weekly gain, fueled by growing concerns over tighter supply following U.S. sanctions on Russian oil producers and the potential for interest rate cuts by the Federal Reserve.
At 0113 GMT, Brent crude futures gained 13 cents, or 0.2%, reaching $81.42 per barrel, after falling 0.9% in the previous session. U.S. West Texas Intermediate (WTI) crude futures were up 27 cents, or 0.3%, to $78.95 a barrel, recovering from a 1.7% decline on Thursday.
Despite a dip on Thursday, caused by expectations that Yemen’s Houthi militia would halt attacks on ships in the Red Sea, both crude contracts remain poised for a fourth weekly gain. Brent is up 9%, and WTI has risen 10% year-to-date.
Supply Fears and Interest Rate Speculation Drive Market
Toshitaka Tazawa, an analyst at Fujitomi Securities, attributed the price rise to two primary factors: “Supply concerns from U.S. sanctions on Russian oil producers and tankers, coupled with expectations for a demand recovery driven by potential U.S. interest rate cuts, are boosting the crude market.
Additionally, Tazawa noted that rising kerosene demand due to cold weather in the U.S. was also adding support to prices.
The market is closely watching the Biden administration’s latest sanctions targeting Russia’s military-industrial complex and sanctions-evasion efforts. These new measures follow broader sanctions against Russian oil producers and tankers, pushing Moscow’s top customers to scour the global market for replacement barrels, which has led to a surge in shipping rates.
Federal Reserve Signals Potential Rate Cuts
In another development, Federal Reserve Governor Christopher Waller indicated on Thursday that inflation is likely to continue easing, which could lead the central bank to cut interest rates sooner and more aggressively than previously expected. This contradicts recent market expectations, which had predicted a shallower rate-cut path.
Natural Gas Soars Amid Cold Weather
Meanwhile, natural gas futures surged by about 4%, reaching a two-year high on Thursday, driven by forecasts for colder weather during the Martin Luther King Jr. Day holiday weekend in the U.S.
Geopolitical Developments Keep Investors Cautious
In the Middle East, maritime security officials have indicated that the Houthi militia is expected to announce a halt in attacks on vessels in the Red Sea, following a ceasefire agreement between Israel and Hamas in the Gaza conflict. The attacks, which have disrupted global shipping for more than a year, forced companies to take longer and more expensive routes around southern Africa.
However, investor sentiment remains cautious. The Houthi leader has stated that the militia will monitor the implementation of the ceasefire deal and could resume attacks on vessels or Israeli targets if the deal is breached.
Related topics: