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Saturday, 20. July 2024

Oil prices steadied as investors monitored developments in the Red Sea

3angleFX

Oil prices found stability on Wednesday as investors closely watched developments in the Red Sea. Despite continued regional tensions, major shippers decided to resume passage through the trade route, leading to a cautious market sentiment.

Brent crude futures dipped 17 cents, marking a 0.21% decline to reach $80.90 a barrel by 0940 GMT. Similarly, U.S. West Texas Intermediate crude saw a decrease of 34 cents, representing a 0.45% drop, settling at $75.23 a barrel.

The benchmarks experienced a more than 2% increase in the previous session. This surge was fueled by concerns over shipping disruptions due to fresh attacks on ships in the Red Sea. Additionally, there were anticipations of U.S. interest rate cuts, which could potentially stimulate economic growth and consequently increase fuel demand.

Despite the challenges posed by attacks from Yemen’s Iran-backed Houthi militia, major shipping companies like Maersk and France’s CMA CGM have decided to resume operations through the Red Sea. This decision follows the deployment of a multinational task force to the region, aiming to ensure safer passage and stability.

“Despite shutting down shipping channels and re-routing vessels, how far the global supplies are impacted is still debatable,” noted Priyanka Sachdeva, senior market analyst at Phillip Nova.

The potential for an extended Israeli military operation in Gaza continues to significantly influence market sentiment.

Israel’s Chief of Staff, Herzi Halevi, indicated on Tuesday that the Gaza conflict is expected to continue for an extended period, spanning “many months“.

Oil loadings at the Russian Black Sea port of Novorossiisk were halted on Wednesday due to a storm, as reported by Reuters sources.

The Caspian Pipeline Consortium (CPC) terminal near the Novorossiisk port has resumed crude exports, according to Kazakhstan’s energy ministry.

A preliminary Reuters poll indicated expectations of a 2.6 million barrel decline in U.S. crude stocks last week, while distillate and gasoline inventories were anticipated to have increased.

Due to the Christmas holiday, the American Petroleum Institute and the Energy Information Administration are releasing their inventory reports on Wednesday and Thursday, respectively, a day later than usual.

 

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