Oil benchmarks steady

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Oil prices were little changed on Tuesday for a second straight day as uncertainty about the pace of potential US interest rate cuts and the impact on fuel demand offset worries about Middle East tensions that could disrupt supply.

Brent futures edged 1 cent lower $81.99 a barrel. US West Texas Intermediate (WTI) crude rose 1 cent to $76.93 a barrel.

Oil prices were near flat in Monday’s trade as well, after gaining 6 percent last week.

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The conflict in the Middle East has kept prices elevated.

On Monday, Israel freed two Israeli-Argentine hostages held by Hamas in Rafah in a ferocious rescue operation that killed 74 Palestinians in the southern Gaza city where about one million civilians have sought refuge from months of bombardments.

But limiting gains were worries about interest rates.

The New York Fed said its January Survey of Consumer Expectations showed the outlook for inflation a year and five years from now were unchanged, with both remaining above the Fed’s 2 percent target rate.

If inflation worries delay Fed interest rate cuts, that could reduce oil demand by slowing economic growth.

US inflation data is expected on Tuesday, while British inflation and euro zone Gross Domestic Product (GDP) data should land on Wednesday.

Market participants awaited industry data later on Tuesday on US crude inventories. Four analysts polled by Reuters estimated on average that crude inventories rose by about 2.6 million barrels in the week to Feb. 9.

Portfolio investors abandoned hope for an early rally in crude prices after a site-wide electricity failure caused an unexpected shutdown in production at BP’s refinery at Whiting in Indiana on Feb. 1.

The refinery is the largest in the US Midwest and processes more than 400,000 barrels per day, so the extended closure for safety checks and restart processes threatens to reduce crude consumption significantly.

Surplus crude is likely to accumulate across the Midwest and especially around the NYMEX delivery point at Cushing in Oklahoma.

Before the power failure, Cushing inventories had been depleting, and investors were positioning for a squeeze on deliverable supplies.

The prospect of a squeeze had been lifting prices for both US crude and Brent, but the outage has delayed further depletion and sent prices sliding.

Hedge funds and other money managers sold the equivalent of 86 million barrels in the six most important petroleum-related futures and options contracts over the seven days ending on Feb. 6. – Reuters

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