Oil futures: Crude prices turn positive but seek clearer direction

Quantum Commodity Intelligence – Crude oil futures Thursday were marginally higher, having reversed earlier losses but markets were still left in a state of flux and looking for clearer direction.

Front-month May24 ICE Brent futures were trading at $82.23/b (1825 GMT), compared to the day's low of  $81.51/b and Wednesday's settle of $82.15/b. The Apr24 contract last traded at $83.76/b ahead of the expiry on thin volumes.

At the same time Apr24 NYMEX WTI was trading at $78.66/b, versus Wednesday's settle of $78.54/b.

Oil futures had eased in post-inventory trading on Wednesday after data from the Energy Information Administration showed crude stockpiles increased for the fifth consecutive week.

Commercial crude oil stocks were up 4.2 million barrels in the week to 23 February at 447 million barrels, including a sharp 1.5 million barrels build at the Cushing hub, the delivery point for NYMEX.

But US gasoline stocks dropped for the fourth straight week, as firmer demand and a slump in imports outweighed another rebound in domestic production.

Bucking the slightly softer trend, Apr24 Brent was heading for a strong expiry as the front-month spread widened out to around +$1.70/b at one point, the highest since early October, with the underlying North Sea physical market finding strong support this month.

Expectations that OPEC+ will roll current quotas into Q2 have also helped shore up markets this week but have largely been priced in even though a final decision has not been announced yet. 

Ceasefire

Meanwhile, talks continue to broker a deal on a Gaza ceasefire in time for the month-long Ramadan holiday, which starts on 10 March. Negotiations had stalled after Hamas initially stated it would not agree to release the hostages for anything other than a permanent ceasefire and a withdrawal of Israeli forces from Gaza.

But a senior Hamas official was quoted Wednesday by Saudi media saying, "There must be a permanent ceasefire sooner or later, but it does not have to be in the first stage."

However, there was no assurance Yemen's Houthis would abide by any ceasefire, and even if it announced a suspension of attacks on commercial shipping, it is unlikely tanker operators would flock back to the Red Sea.

On the economic front, investors were waiting for the US personal consumption expenditures price index to provide clues on the Federal Reserve's interest policy after oil markets wobbled midweek when a senior official played down prospects for an early rate cut.

"Concerns about [oil] demand are offsetting the prospect of tighter supply. Federal Reserve governor Michelle Bowman signaled that she was in no rush to cut US interest rates, echoing similar views from her colleagues. High-interest rates for longer could dent the demand outlook in the US," commented City Index analyst Fiona Cincotta.

The US Congress also needs to find a budget consensus by the weekend to avoid another damaging partial government shutdown.

Meanwhile, China's closely-watched manufacturing purchasing managers' index is scheduled for release Friday.