Brent Stumbles, Risks Lurk
Oil prices weakened after a three-day rally, as the market weighed the impact of Ukraine's attack on Russian energy infrastructure and the Fed's interest rate decision Wednesday night. Brent held near $68 per barrel after rising 3.2% in the previous three sessions, while WTI eased to around $64. This time, the movement was more of a wait-and-see approach ahead of the policy release.
On the geopolitical front, Ukraine again attacked the Saratov refinery, part of a series of attacks that Goldman Sachs said have pushed Russian production to its lowest level since the pandemic. The market is also wary of the risk of escalation following a drone incident in Poland. Standard Chartered's head of energy research, Emily Ashford, said the primary focus is now on Russian supply flows and the potential for a wider conflict.
Despite the geopolitical boost, the recent rally has not been enough to lift prices out of the narrow range of around $5 that has persisted for more than six weeks. Predictions of a year-end oversupply are growing as OPEC+ supply returns more quickly, while a surge in tanker earnings suggests higher output.
On the macro front, the Fed is expected to cut interest rates by 25 bps—and the market has even priced in three more cuts through April. Ashford believes 25 bps is already “priced in”; a 50 bps surprise could potentially trigger a risk-on trend that could support commodity prices. The dollar's direction and post-decision risk sentiment will be the next drivers for oil.
In the US, an industry report showed crude inventories fell by 3.4 million barrels last week—if confirmed by official data, it would be the largest decline in a month. Implied volatility in the second-month Brent contract also remained subdued after falling to a more than three-week low on Monday. At 10:28 a.m. London time, Brent for November delivery fell 0.7% to $67.99, and WTI for October delivery fell 0.7% to $64.08. (ayu)
Source: Bloomberg.com
