Oil edged higher, rebounding from a three-week low, as traders weighed rising geopolitical risks against hawkish comments from Federal Reserve Chair Jerome Powell.

West Texas Intermediate rose above US$72 a barrel after swinging between gains and losses, with a rally in the afternoon bolstered by equity markets rebounding from intraday lows. Also supporting prices are the biggest US attacks on Yemen’s Houthis since an initial operation on Jan. 11. Yet while the conflict has increased threats to ships in the Red Sea, ample supplies have muted the geopolitical risk premium in crude.

The risk appetite in broader markets weakened after Powell said in an interview Sunday that Americans may have to wait beyond March for rate cuts while the central bank assesses whether inflation is retreating in a “sustainable way.” Meanwhile, the dollar rose to the highest in almost three months, making commodities priced in the currency less attractive.

Crude slumped last week — erasing most of this year’s gains — amid talks to pause the four-month Israel-Hamas war, though US National Security Advisor Jake Sullivan said on Sunday that an agreement isn’t imminent.

Elsewhere, a sizable amount of refining capacity is likely to be offline after a fire at the Lukoil PJSC facility in Russia’s Volgograd over the weekend, blamed on a downed drone from Ukraine. European diesel futures jumped as much as 2.6 per cent on Monday, the most in a week. In the US, the largest Midwest refinery — BP Plc’s plant in Whiting, Indiana — is also down.

Prices:

• West Texas Intermediate rose 50 cents to settle at $72.78 a barrel in New York.
• Brent for April settlement rose 66 cents $77.99 a barrel.