The search for balance in oil

Oil prices rose as the market weighed geopolitical risks in the Middle East against the Fed’s hawkish comments. Brent crude rose 0.9% to trade around $78 a barrel after rebounding from a three-week low on Monday. Benchmark U.S. crude was below $73. The U.S. has vowed more strikes against Iranian forces and regional proxies, and Israeli Prime Minister Benjamin Netanyahu said a decisive victory over Hamas was essential to his country’s security. Financial markets continued to dismiss the possibility of a Fed rate cut in March after comments from officials including Fed Chair Jerome Powell that propelled the dollar higher. The U.S. currency is near its highest level since mid-November, making the commodity less attractive to many buyers. Attacks in the Middle East and threats of retaliation have added to the risk premium for crude, which had its worst week since October. The downtrend was driven by talks to end the four-month-long Israel-Hamas war, signs of strong supply and tepid demand from top importer China. Meanwhile, Saudi Arabia kept the price of its main crude steady in March as the Organization of the Petroleum Exporting Countries and its allies continued production cuts to prevent a surplus. The kingdom will need oil prices to average above $90 a barrel this year to balance its budget, Fitch Ratings said in a note. OPEC+ is set to decide in early March whether to extend restrictions into the second quarter.