Oil settles lower as rate cut hopes moderate, Brent holds near $90/bbl

April 11 – Oil prices settled lower on Thursday as sticky inflation dampened hopes for near-term US interest rate cuts, but worries that Iran might attack Israeli interests kept crude near six-month highs.

Brent crude futures settled down 74 cents, or 0.8%, to USD 89.74 a barrel while US West Texas Intermediate crude futures settled down USD 1.19, or 1.4%, to USD 85.02.

It will be difficult to maintain Brent above USD 90 a barrel in the second half of the year without actual supply disruption associated with geopolitical events, said global energy strategist Vikas Dwivedi of Macquarie.

“As a result, we expect oil to turn bearish as the year progresses due to non-OPEC supply growth, a material amount of OPEC+ spare capacity re-entering the market, and the potential that continuing inflation softens demand.”

Minutes from the US Federal Reserve showed officials worried that progress on inflation might have stalled and a longer period of tight monetary policy would be needed.

Investors who had expected a rate cut in June now see September as a likelier timing, following a third straight consumer inflation reading that exceeded forecasts.

In Europe, central bank officials kept borrowing costs at a record high as expected, but signalled the ECB may soon cut rates.

Slower rate cuts could crimp oil demand, yet OPEC stuck to its forecast for relatively strong global demand growth in 2024.

The International Energy Agency will announce its expectations in its monthly report on Friday.

Oil prices were also pressured by a power outage on Wednesday that shut multiple fuel-producing units at Motiva Enterprise’s massive 626,600 barrel per day Port Arthur, Texas facility.

Motiva began restarting the gasoline-producing fluidic catalytic cracker (FCC) on Thursday morning, said people familiar with plant operations.

Meanwhile, traders worried that Iran might retaliate for a suspected Israeli air strike on its embassy in Syria on April 1. US Secretary of State Antony Blinken has vowed that the US will stand with Israel against any threats by Iran.

This week, Israel and Hamas began a fresh round of negotiations in their more than six-month-old Gaza war but those talks have yielded no agreement.

(Additional reporting by Noah Browning and Natalie Grover in London, Shariq Khan in New York, and Emily Chow in Singapore; editing by Christopher Cushing, Jason Neely, David Evans, and David Gregorio)