Oil regains gains on production concerns and Red Sea attacks

Price action

Brent crude futures rose 34 cents, or 0.4 percent, to $82.68 per barrel by 0341 GMT, while US West Texas Intermediate crude futures rose 29 cents, or 0.38 percent, to $77.33.

Brent contracts fell 1.5 percent and West Texas Intermediate contracts fell 1.4 percent in Tuesday’s session settlement.

Washington once again used its veto on Tuesday against a draft resolution in the UN Security Council on the war between Israel and Hamas, blocking the demand for an immediate ceasefire on humanitarian grounds. Instead, the United States is seeking to push the Security Council to adopt a resolution linking the ceasefire to the release of Israeli hostages held by Hamas.

Yemen's Houthi attacks on ships in the Red Sea and Bab al-Mandab Strait have continued to raise concerns about shipping flows through the vital waterway. Drone and missile attacks have hit at least four ships since Friday.

Meanwhile, Russia said yesterday that it intends to meet its quota for the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, in February despite a decline in oil refining. It had pledged to reduce production by 500,000 barrels per day as part of the OPEC+ cuts package.

The Russian Energy Minister said on Tuesday that the production of refineries in Russia has decreased by seven percent since the beginning of the year, after the facilities were damaged by Ukrainian drone attacks.

Concerns that the Federal Reserve (the US central bank) will take longer to lower interest rates than expected have affected oil demand expectations.

US inflation data last week led to a decline in expectations of the imminent start of the monetary easing cycle in the United States, as economists polled by Reuters now expect a reduction in borrowing costs in June.

A preliminary poll conducted by Reuters on Tuesday showed that US crude inventories rose last week, while distillate and gasoline inventories decreased.

Analysts polled by Reuters estimated that crude inventories rose by about 4.3 million barrels in the week ending February 16.