Oil prices fell on Wednesday amid Gaza Strip cease-fire discussions, uncertainty over the US Federal Reserve's interest rate cut timing, and expectations that Hurricane Beryl will not damage Gulf of Mexico oil infrastructure.
International benchmark Brent crude traded at $84.36 per barrel at 11.20 a.m. local time (0820 GMT), a decrease of 0.35% from the closing price of $84.66 per barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $81.24 per barrel at the same time, a 0.20% fall from the previous session that closed at $81.41 per barrel.
Cease-fire talks in the Middle East, home to a vast majority of global oil reserves, continue to put downward pressure on oil prices by relieving the supply concerns among market players.
Egyptian Foreign Minister Badr Abdelatty and US Secretary of State Antony Blinken explored over the phone the opportunities for a cease-fire in the Gaza Strip, said Cairo on Tuesday.
The discussion coincided with ongoing negotiations in Cairo and Doha regarding a potential truce deal and prisoner exchange between Hamas and Israel.
According to a statement by the Egyptian Ministry of Foreign Affairs, both top diplomats “focused on the ongoing efforts to mediate a cease-fire and facilitate the exchange of prisoners and humanitarian aid access to the Gaza Strip.”
Furthermore, ongoing uncertainties regarding when the Fed will lower interest rates continue to influence prices by raising demand concerns.
US Federal Chair Jerome Powell said Tuesday that the Fed has maintained the target range for the federal funds rate at 5.25% to 5.5% since July 2023, and reiterated that the Federal Open Market Committee (FOMC) does not expect it will be appropriate to reduce the target range for the federal funds rate until it has 'gained greater confidence' that inflation is moving sustainably toward 2%.
'Incoming data for the first quarter of this year did not support such greater confidence. The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2%,' he said.
The probability of the Fed's first rate cut in September retreated to 77% and 79% for November. The possibility of the bank cutting interest rates for the second time in December is 96%.
High interest rates increase the value of the US dollar against other currencies and negatively impact oil demand by making it more expensive.
Meanwhile, Hurricane Beryl, which reached the Texas coast of the US with a 'category 1' intensity, continues to influence oil prices.
Although the concern that some ports in the US might close down due to the hurricane fueled fears that the closure could temporarily halt energy exports, it was stated that oil and gas companies in the region resumed their operations on Tuesday.
These developments have lowered prices, supporting the thought that Hurricane Beryl would not leave permanent damage to the oil infrastructure in the Gulf of Mexico.
However, the fall in US commercial crude oil reserves limited downward price movements by reflecting market perceptions of strengthening domestic demand.
Data released by the American Petroleum Institute (API) late on Tuesday showed a decrease of 1.92 million barrels in US crude oil inventories, against the market prediction of a draw of 250,000 barrels.
Official statistics from the Energy Information Administration (EIA) will be released later in the day, and if a decrease in crude and gasoline stockpiles is confirmed, prices are expected to climb further.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr