Oil Prices Stabilize Amidst Russian Supply Cuts and U.S. Inventory Rise

After suffering its biggest one-day loss in seven weeks, Brent crude futures have stabilized, rising by 0.3% to $80.85 a barrel on Thursday.

The gains follow the announcement of Russian plans to cut oil exports from its western ports by up to 25% in March, exceeding its previous announcement of a 500,000 barrel-per-day production cut.

However, these gains are capped by expectations of a rise in U.S. inventories and further interest rate hikes by the U.S. Federal Reserve.

The recent release of minutes from the latest Federal Reserve meeting shows that a majority of policymakers agreed that high inflation risks require further rate hikes, indicating that oil prices may remain volatile in the near future.

Furthermore, the U.S. dollar has strengthened against a basket of other currencies in recent weeks, making oil more expensive for holders of other currencies.

Despite these factors, UBS analysts remain optimistic, suggesting that the tightening of the oil market resulting from lower Russian production and China’s reopening will support prices. However, there are still signs of further crude inventory builds in the U.S. with crude oil and fuel inventories rising by 9.9 million barrels last week, according to market sources citing American Petroleum Institute figures.

Official data from the U.S. Energy Information Administration is expected to be released later in the day, shedding more light on the state of U.S. inventories. While the near-term outlook for oil prices remains uncertain, the market is likely to continue reacting to a combination of supply and demand dynamics, as well as broader economic factors, in the coming weeks.