Oil Rises on Houthi Ship Attack, Market Pessimism Prevails

Oil prices climbed on Tuesday following an attack by the Iran-aligned Houthis on a chemical tanker, heightening geopolitical tensions in the Middle East. However, concerns about oversupply and sluggish demand tempered the price gains.

A cruise missile fired from Houthi-controlled Yemen hit a commercial chemical tanker, resulting in a fire and damage. Fortunately, there were no casualties in the attack, which adds to the safety concerns for tankers navigating critical shipping lanes.

Brent crude futures for February rose 0.3% to $76.24 a barrel, while U.S. West Texas Intermediate crude futures for January delivery gained 0.4% to $71.59, following an attack on a chemical tanker that heightened geopolitical tensions in the Middle East.

The attack on the chemical tanker has contributed to a rally in oil prices, but overall sentiment remains negative, with the demand side of the oil equation providing little support amid a discouraging fundamental backdrop, according to Tamas Varga of broker PVM.

Investors tread cautiously before key events: U.S. inflation report, FOMC meeting, COP28 climate summit talks, and U.S. inventory reports forecasting a 1.5 million-barrel crude stock drop. Complex dynamics persist amid geopolitical tensions and supply-demand concerns.

“All attention will be on the U.S. CPI data today to potentially set the tone for U.S. policymakers at their upcoming meeting,”  said market analyst at IG, Yeap Jun Rong, in a note.

Negotiators at the COP28 climate summit are awaiting a new draft deal after criticism of the previous version for being too weak, particularly due to the absence of a clear phase-out of fossil fuels.

U.S. inventory reports, expected to show a 1.5 million-barrel drop in crude stocks, are on the horizon, with the American Petroleum Institute releasing the first report at 2130 GMT.

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