Moscow Ceasefire Rejection By U.S. Propels Oil Prices Upward

OPEC's bullish demand outlook also supported oil on Tuesday: File Image/Pixabay

 

The U.S. rejecting Moscow's suggestion of a ceasefire in Ukraine was said to be a driving factor in oil prices rising on Tuesday, eclipsing news that the market is no longer expecting central banks to lower their interest rates this spring.

Brent was up 96 cents to $82.96 per barrel by 17:16 GMT, and West Texas Intermediate rose $1.18 at $78.10 per barrel.

Three Russian sources with knowledge of the matter told Reuters that last year Russian president Vladimir Putin sent signals to Washington that he was ready to consider a ceasefire in Ukraine, but that the U.S. refused to discuss any such proposal without Ukraine's participation.

The news came as Washington continued to push Congress to approve more aid for Ukraine despite a growing backlash against any further funding.

Bloomberg theorized that oil prices on Tuesday were also supported by the Organization of the Petroleum Exporting Countries' (OPEC) monthly report, which projected that global oil demand will continue strong growth this year at 2.2 million barrels per day (bpd) and increase by 1.8 million bpd in 2025: "the breach above the technical threshold raises the possibility of additional upward momentum," the news agency said.

The largest rate of oil demand increase this year is expected to come from the Middle East and India, which are expected to see demand increases of more than 4 percent.

Meanwhile, attention was still paid to Middle East tensions, with John Evans, an analyst at PVM, telling clients in a note, "Oil prices have been numbed into submission by what has transpired, or not, in the Middle East."

He added that, "All flow charts of consequence can immediately be undone by an untoward act, missile or sudden peace agreement and crude prices will move $10/barrel."

As for central banks, the CME FedWatch Tool stated that the market is no longer counting on the Federal Reserve lowering interest rates in May, meaning growth in oil demand may be compromised as lower rates typically spur economic growth.