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Oil gains as Russian supply cuts temper concerns over rate hikes, high stocks
Global Banking & Finance Review®
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By Andrew Hayley
BEIJING (Reuters) -Oil prices extended gains for a second session on Friday as the prospect of lower exports from Russia offset rising inventories in the United States.
Brent crude futures rose 67 cents, or 0.8%, to $82.88 per barrel by 0415 GMT. West Texas Intermediate crude futures (WTI) rose 61 cents, or 0.8%, to $76.00 a barrel.
The benchmarks ended about 2% higher in the previous session on Russia’s plans to cut oil exports from its western ports by up to 25% in March which exceeded its announced production cuts of 500,000 barrels per day.
“Higher-than-expected U.S. crude oil inventories continue to challenge the oil demand outlook, but expectations for lower Russian production have an offsetting impact,” said Yeap Jun Rong, a market strategist at IG.
U.S. inventories are at their highest level since May 2021.
U.S. crude stocks rose by 7.6 million barrels to about 479 million barrels in the week to Feb. 17, data from the U.S. Energy Information Administration said. [EIA/S]
For the week, oil prices are slightly lower, after the previous week’s about 4% declines, dragged also by concerns about rising interest rates that could strengthen the dollar.
Minutes from the latest U.S. Federal Reserve meeting indicated that a majority of officials remained hawkish on inflation and tight labour market conditions, signalling further monetary tightening.
The prospect of further rate hikes supported the dollar index, which was set for a fourth straight week of gains. The index is now up about 2.5% for the month. [FRX/]
A firm dollar makes commodities priced in the greenback more expensive for holders of other currencies.
“The focus as we close the week will be on what happens with next inflation report, will the market get more nervous on even more tightening from the Fed,” OANDA analyst Edward Moya said.
(Reporting by Andrew Hayley; Additional reporting by Jeslyn Lerh; Editing by Himani Sarkar)
Brent crude is a major trading classification of crude oil originating from the North Sea. It serves as a benchmark for oil prices globally and is used to price two-thirds of the world's crude oil.
U.S. crude oil inventories refer to the amount of crude oil stored in the United States. These inventories are reported weekly and are a key indicator of supply and demand in the oil market.
Monetary tightening is a policy implemented by central banks to reduce the money supply, often through increasing interest rates. This is typically done to combat inflation and stabilize the economy.
The dollar index measures the value of the U.S. dollar relative to a basket of foreign currencies. It is an important indicator of the dollar's strength and is used by traders and investors.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are influenced by central bank policies and affect economic activity and inflation.
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