Oil prices stabilized during Asian trading today, Tuesday, with investors focusing on geopolitical tensions in the Middle East. Investors are also optimistic that the Federal Reserve will soon begin lowering interest rates. Therefore, this will contribute to higher global economic growth and a boost in oil demand.
Brent crude futures fell 26 cents or 0.3 percent to $79.13 per barrel by 0115 GMT. Meanwhile, the price of US West Texas Intermediate crude reached $73.59 per barrel, up three cents.
The volume of transactions is weak, given that some markets are still closed due to the Christmas holiday.
Oil prices increased about three percent last week after tensions in the Red Sea disrupted global shipping and trade. Moreover, tensions in the Middle East are increasing as the conflict between Israel and Gaza continues.
The Danish company Maersk stated recently that it is preparing to resume shipping operations through the Red Sea and the Gulf of Aden. Moreover, it indicated the start of a U.S.-led military operation aimed at ensuring the safety of trade in the region.
Shipping companies had stopped the passage of ships through the Red Sea leading to the Suez Canal, through which about 12 percent of global trade passes. Moreover, they imposed additional fees for changing the course of ships.
Oil prices were also supported by expectations that the US Federal Reserve will cut interest rates next year. That is following the release of US data showing that inflation is now at or below the central bank’s target of two percent.
Therefore, lower interest rates reduce consumer borrowing costs, which can boost economic growth and oil demand.
Oil prices recover
Oil prices witnessed a recovery last Friday after recording a decline of more than 1 percent on Thursday. Brent crude futures rose by 0.64 percent to $79.92 per barrel. Meanwhile, US West Texas Intermediate crude futures recorded a 0.64 percent increase at $74.38 per barrel.
This rise came after a decline in oil prices following Angola’s recent announcement of its withdrawal from the Organization of the Petroleum Exporting Countries (OPEC). Following that announcement, Brent crude futures prices fell 31 cents to $79.39 per barrel. Whereas, US West Texas Intermediate crude futures prices fell 33 cents to $73.89 per barrel. Angola’s announcement led to a decline of more than one dollar in both futures during the trading session.
Angola’s Minister of Mineral Resources, Oil and Gas Diamantino Azevedo said that OPEC membership no longer served the country’s interests. The decision came after Angola protested OPEC’s November move to cut its production quota for 2024, which was aimed at increasing oil prices.
Angola, producing around 1.1 million barrels per day, is one of the smallest producers in OPEC. However, its exit raises questions about the unity and direction of OPEC.
For more news on markets, click here.