NEW YORK: Oil prices steadied on Thursday, after Brent crude earlier hit a seven-year high above $90 a barrel, as the market continued to balance concerns about tight worldwide supply with expectations that the US Federal Reserve will soon tighten monetary policy.
Global benchmark Brent rose 15 cents to $90.11 a barrel by 11:40 a.m. EST (1640 GMT), while US crude futures gained 18 cents to $87.53 in a volatile session with both contracts see-sawing between positive and negative territory.
Crude prices surged on Wednesday, with Brent climbing above $90 a barrel for the first time in seven years amid tensions between Russia and the West. Recent threats to the United Arab Emirates from Yemen’s Houthi movement have added to jitters in the oil market.
Russia, the world’s second-largest oil producer, and the West have been at loggerheads over Ukraine, fanning fears of disruption of energy supplies to Europe. The concerns are oriented more around natural gas supply than crude oil, however.
Russia said on Thursday it was clear the United States was not willing to address its main security concerns in their standoff over Ukraine, but kept the door open for further dialogue.
“The market is very erratic on headlines on the Russia-Ukraine situation,” said Phil Flynn, senior analyst at Price Futures Group. “There’s uncertainty about what’s going to happen.”
Weighing on prices, the US Federal Reserve said on Wednesday that it is likely to raise interest rates in March and plans to end its bond purchases that month in its battle to tame inflation.
The US dollar climbed after the announcement, making oil more expensive for buyers using other currencies. On Thursday, the dollar index climbed to the highest since July 2021.
“A more pronounced price slide is being prevented by the Ukraine crisis, as there are still concerns that Russian oil and gas deliveries could be hampered in the event of a military escalation,” Commerzbank said after the morning price dip.
The market is starting to turn its attention to a Feb. 2 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+.
OPEC+ is likely to stick with a planned increase to its oil output target for March, several sources in the group told Reuters.
It has raised its output target each month since August by 400,000 barrels per day (bpd) as it unwinds record production cuts made in 2020. However, the group has faced capacity constraints that have prevented some members from producing at their quota levels.