By Georgina McCartney
Houston (Reuters) -Oil prices settled higher on Tuesday as geopolitical tensions continued in the Middle East and eastern Europe, but gains were curtailed as the U.S. Federal Reserve was seen waiting longer to cut interest rates.
Brent futures settled 77 cents higher or 0.94% at $82.77 a barrel at 2:30 p.m. EST (19:32 GMT). U.S. West Texas Intermediate (WTI) crude settled 95 cents higher, or 1.24%, at $77.87 a barrel.
Oil prices were near flat in Monday trade after gaining 6% last week, with the conflict in the Middle East keeping prices elevated.
The United States rejected Russian President Vladimir Putin’s suggestion of a ceasefire in Ukraine, according to sources.
The rejection “punctuates that there is not really an end game in terms of a ceasefire or a peace deal until Ukraine gets what it wants,” said John Kilduff, partner at New York-based Again Capital. “U.S. sanctions are finally starting to bite as well, and we are seeing various countries backing away from taking Russian supplies.”
News of U.S. rejection of the floated ceasefire on top of fears of further escalation of the war in the Middle East continued to stoke future supply concerns.
Talks involving the U.S., Egypt, Israel and Qatar on a Gaza truce ended without a breakthrough on Tuesday as calls grew for Israel to hold back on a planned assault on the southern end of the enclave, crammed with over a million displaced people.
Yemen’s Iran-aligned Houthis also have kept up their attacks in the Red Sea, claiming solidarity with Palestinians and striking vessels with commercial ties to the U.S., Britain and Israel.
In an indication of tighter supply, the premium of the WTI front-month over the seventh month and 13th month held at a three-month high. The premium of the Brent front-month over the seventh month was also at a more than two-month high.
Federal Reserve policymakers are seen waiting for more evidence of easing price pressures before they cut interest rates, after a government report on Tuesday showed consumer inflation stayed elevated last month.
If inflation worries delay Fed rate cuts, that could dampen economic growth and hit oil demand.
The dollar rose to three-month peaks on Tuesday on the Fed news. A stronger dollar reduces demand for dollar-denominated commodities for buyers paying in other currencies.
OPEC on Tuesday stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025, and raised its economic growth forecasts for both years, saying there was further upside potential.
The producer group and allies including Russia, known as OPEC+, in March will be deciding whether to extend voluntary oil production cuts.
“Our balance sheet suggests that the market will be in surplus in the second quarter of 2024 if the group fails to roll over part of these cuts,” ING analysts said in a note.
(Reporting by Georgina McCartney and Arathy Somasekhar in Houston, Paul Carsten in London, Stephanie Kelly in New York and Emily Chow in Singapore; Editing by Kim Coghill, Mark Potter, Jan Harvey, Bill Berkrot and Leslie Adler)
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