Oil prices rise due to Fed’s inflation remarks and tensions in the Middle East

Oil prices increased on Friday following Federal Reserve meeting minutes indicating controlled inflation, coupled with U.S. Secretary of State Antony Blinken’s Middle East visit to address the Israel-Gaza situation.

Brent crude futures climbed 0.4% to $77.90 a barrel, and U.S. West Texas Intermediate crude futures advanced 0.6% to $72.62 by 0557 GMT.

Both benchmarks are poised to finish the first week of the year with gains, recovering almost all losses from Thursday, attributed to significant weekly increases in gasoline and distillate stocks.

 The Fed meeting minutes didn’t offer explicit hints on the timing of interest rate cuts. However, they indicated increasing confidence in controlling inflation and growing worries about the potential harm of an excessively tight monetary policy on the economy.

Lower interest rates can stimulate economic growth and enhance oil demand by reducing consumer borrowing costs.

In the Middle East, Israeli forces are strategizing a focused operation in the northern region and intensifying efforts to target Hamas leaders in the south, as confirmed by its defense minister on Thursday.

The State Department announced that Blinken would embark on a week-long diplomatic mission to the Middle East on Thursday, aiming to deter the conflict from escalating further.

According to the U.S. Energy Information Administration, gasoline inventories saw their most significant weekly increase in over three decades last week. Concurrently, distillate product supplies, indicative of demand, dropped to the lowest point since 1999.

However, the negative data was balanced by geopolitical tensions, optimism about economic recovery due to potential rate cuts, and ongoing worries related to shipping disruptions.

“There is still plenty of tension in the Middle East with Houthi rebels launching a sea drone in the Red Sea, a US airstrike in Baghdad,” said ING analysts in a Friday report.

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