Oil Prices Climb as Attacks Persist at Red Sea
Oil prices climbed on Friday as the Red Sea attack persisted. Israel-Palestine conflict continues heightening fears of a wider war for the Middle East.
As attacks in the Red Sea persist, only freight rates for key flows via the region have surged. Tanker diversions have picked up but not en-masse, as volumes continue to flow via the Red Sea.
Crude prices are set to close out the first week of the New Year with a small gain as tensions in the Middle East continue to provide support. Tensions in the Red Sea are mounting at the start of 2024 as attacks from the Houthi rebels continue to occur.
Several companies in the shipping world – at least 18 given recent comments from the IMO – have decided to steer clear from the Red Sea, with containerships feeling the greatest impact with freight rates tripling over the last month to hit 12-month highs.
International benchmark crude Brent traded at $78 per barrel, representing a 0.52% gain from the closing price of $77.59 a barrel in the previous trading session on Thursday.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $72.69 per barrel, up 0.69% from Thursday’s close of $72.19 per barrel. British Private Sector Economy Expands in December –PMI
Investors were awaiting the minutes of the Fed meeting in December to see the direction of the US economy and country’s interest rate policy in the coming months.
According to the minutes released on Wednesday, US Federal Reserve members believe interest rates are near their ‘peak’.
‘In discussing the policy outlook, participants viewed the policy rate as likely at or near its peak for this tightening cycle, though they noted that the actual policy path will depend on how the economy evolves,’ the Fed’s December meeting minutes revealed.
The Fed skipped a rate hike for the fourth time in 2023 on Dec. 13, keeping the federal funds rate unchanged between the 5.25% – 5.5% target range — still the highest in 22 years.
The central bank made 11 interest rate increases from March 2022 through July 2023 to fight record inflation that climbed during the summer of 2022 to its highest in more than four decades.
President of Richmond Federal Reserve Bank Tom Barkin on Thursday said during his speech at the Raleigh Chamber of Commerce in North Carolina that ‘a soft landing is increasingly conceivable but in no way inevitable.’
The country’s crude oil inventory data released by the Energy Information Administration (EIA) on Thursday showed that demand is upsurging in the world’s largest oil-consuming nation.
According to data, US commercial crude oil inventories decreased by around 5.5 million barrels to 431.1 million barrels, compared to the American Petroleum Institute’s expectation of a draw of around 7.4 million barrels.
However, gasoline inventories rose by around 10.9 million barrels, limiting further price upticks.
Prices also continue receiving help from the rising tension in the Middle East after Hamas’ Political Bureau Deputy Chairman Saleh al-Arouri and six others were killed Tuesday in an Israeli drone attack in the Dahieh district of Beirut, referred to as Hezbollah’s stronghold.
Oil prices saw further gains after Libya’s largest oilfield, the Sharara, shut down completely amid protests.
About 300,000 barrels of oil per day is now at risk in Libya’s two oil facilities, El-Feel and Sharara, country’s largest oil field, due to protests over high fuel prices and a lack of job opportunities in the country.
