Oil prices surge amid Red Sea tensions

Oil prices rose in Asian trade on Wednesday due to concerns about attacks on shipping in the Red Sea and expectations that U.S. interest rate cuts will be delayed, Reuters reported.

Brent crude futures increased by 0.36 per cent to $82.64 a barrel, while U.S. West Texas Intermediate crude futures (WTI) grew 0.34 per cent at $77.3.

The premium for prompt U.S. crude futures to the second-month contract doubled to $1.71 a barrel, encouraging energy companies to sell now rather than store product for future months. The premiums slid to four cents a barrel on Wednesday.

Vandana Hari, founder of oil market analysis provider Vanda Insights, said crude futures prices have stabilised within a certain range and currently carry a risk premium of $6-7 per barrel.

Concerns about delayed rate cuts by the Federal Reserve have impacted the oil demand outlook. Last week’s U.S. inflation data has shifted expectations for the Fed’s easing cycle, with economists now predicting a cut in June.

Russia, which has pledged output cuts of 500,000 barrels per day (bpd) as part of a package of cuts with OPEC+, said it intends to fulfill its OPEC+ quota in February despite a decline in oil refining.

A preliminary Reuters poll on Tuesday showed that U.S. crude inventories were seen up last week, while distillates and gasoline stockpiles were seen dropping.

Analysts estimated that crude inventories rose by an average of 4.3 million barrels in the week ending February 16.