Fears about the Middle East's rising tensions are driving up oil prices.
December 28, Tokyo – Early on Thursday in Asian trading, oil prices increased as concerns about transportation interruptions eased and concerns about growing tensions in the Middle East persisted. This was due to the announcement by certain international shipping companies that they would be resuming their Red Sea route .
By 01:33 GMT, Brent crude futures had increased by 20 cents, or 0.3%, to $79.85 per barrel. American WTI oil futures were up 24 cents, or 0.3%, to $74.35 a barrel.
On Wednesday, prices fell by over 2% as big shipping companies started going back to the Red Sea.
It’s challenging to sell further due to ongoing concerns about Middle East tensions, particularly Iran’s involvement in the region,” stated Hiroyuki Kikukawa, president of NS Trading, a division of Nissan Securities. “Red Sea shipping worries have diminished.”
“The market is likely to try the upside again… maybe in the early new year, also on expectations of a recovery in fuel demand thanks to monetary easing in the United States and increased demand for kerosene in the northern hemisphere’s winter months,” he said..
After declaring a temporary stop to those routes this month due to attacks by Yemen’s Houthi militia, which is supported by Iran, Danish shipping major Maersk said it has planned several dozen container ships to go via the Red Sea and Suez Canal in the upcoming weeks.
However, the likelihood of an extended Israeli military campaign in Gaza and the conflict’s spread to ship strikes in the Red Sea continue to be significant factors influencing market sentiment.
On Wednesday, Israeli forces hammered central Gaza via air, sea, and land, after the announcement by Israel’s chief of staff, Herzi Halevi, to reporters that the war would last “for many months”.
Support was also increased by growing anticipation that major central banks, like the Federal Reserve, would begin reducing interest rates early in the upcoming year. Reduced borrowing costs due to lower interest rates can boost the demand for oil as well as economic growth.
In response to the increase in U.S. crude stockpiles last week, the market exhibited minimal movement.
According to market sources quoting American Petroleum Institute data on Wednesday, U.S. oil stocks increased by 1.84 million barrels in the week ending December 22, defying a prediction of approximately 2.7 million barrels decline in a Reuters poll of seven analysts.
Due to the Christmas holiday on Monday, U.S. government data on stocks is due on Thursday instead of Monday.
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