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Crude oil futures closed higher Tuesday to start the week with back-to-back gains after plunging last week to three-week lows.
Prices initially climbed more than $1/bbl but pulled back after Secretary of State Antony Blinken said on his efforts to negotiate a ceasefire in the Gaza War that a Hamas reply to a proposal was being reviewed.
At the same time, the U.S. continued its campaign against Iran-backed Houthis, whose attacks on shipping vessels in the Red Sea have disrupted global oil trading routes.
“Geopolitical tensions are likely to keep crude bulls in the game above $70,” but gains may be “capped down the road due to rapidly falling expectations around aggressive Fed rate cuts and growing concerns over China’s economy,” FXTM’s Lukman Otunuga told MarketWatch.
Front-month Nymex crude (CL1:COM) for March delivery finished +0.7% to $73.31/bbl, and front-month April Brent crude (CO1:COM) closed +0.8% to $78.59/bbl.
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In its Short-Term Energy Outlook, the U.S. Energy Information Administration cut its forecast for domestic oil production growth, seeing U.S. output growing by 170K bbl/day this year, down from its previous outlook for a 290K bbl/day rise and well below last year’s increase of 1.02M bbl/day.
The EIA said it now sees U.S. crude production coming in flat for most of this year at 13.21M bbl/day and not reaching a new record until early 2025, potentially easing concerns about a supply glut that has weighed on prices.
Shut-ins from cold weather caused output to drop to 12.6M bbl/day in January from a record 13.3M bbl/day in December, the EIA reported.