Demand Rises But Oil Prices Down With Interest Rate Cut Disappointment

Meanwhile, OPEC's cuts may extend into Q2 2024: File Image/Pixabay

Despite central banks warning for some weeks now that a cut in interest rates would likely be postponed, news on Friday that cuts could be delayed contributed to a decline in daily trading as well as a weekly loss.

However, analysts noted that futures could be supported moving ahead due to Europe and Africa physical oil markets tightening as well as Brent's market structure continuing to indicate robust demand.

Indeed, JPMorgan analysts write in a note that oil demand rose by 1.7 million barrels per day (bpd) month over month through Feb. 21, according to indicators.

Brent on Friday settled down $2.05, or 2.5 percent, at $81.62 per barrel, while West Texas Intermediate settled down $2.12, or 2.7 percent, to $76.49; for the week, Brent declined about 2 percent and WTI fell over 3 percent.

Analysts anticipating rate cuts despite persistent signals that they would be delayed were disappointed on Friday when U.S. Federal Reserve governor Christopher Waller said policymakers should delay U.S. interest rate cuts by at least another couple of months.

Tim Snyder, economist at Matador Economic, said, "That is not something the market wants to digest right now, especially as it is trying to figure out a direction."

Rebecca Babin, a senior energy trader at CIBC Private Wealth, pointed out that "No increased energy sanctions and ceasefire talks over the weekend are causing some to take dollars off the table in crude."

She was referring to new U.S. sanctions against Russia, which didn't seem to include significant energy-related curbs, as well as media reports that Israel sent negotiators to Paris on Friday for truce talks between that country and Hamas. 

In other oil news Friday, an anonymous survey conducted by media showed that 14 of 17 traders are convinced the Organization of Petroleum Exporting Countries (OPEC) will be forced to extend their Q1 2024 production cuts into Q2 "in order to avoid a meltdown," according to Tamas Varga, analyst at PVM Oil Associates Ltd.

Amrita Sen told Bloomberg, "The physical markets are telling us that actually markets have tightened; we do believe that OPEC+ will extend its cuts in some form."