Oil prices witnessed little change today, Wednesday, as investors monitored developments in the Red Sea. Some major shipping companies resumed transit through the region despite ongoing attacks and broader tensions in the Middle East.
Oil prices
By 0415 GMT, Brent crude futures fell five cents, or 0.1 percent, to $81.02 per barrel. Meanwhile, U.S. West Texas Intermediate crude fell 12 cents, or 0.2 percent, to $75.45 per barrel.
The two benchmarks settled higher by more than two percent in the previous session. That comes in light of constant attacks on ships in the Red Sea which raised fears of disruption in shipping traffic. In addition, investors are hopeful that lowering U.S. interest rates could boost economic growth and fuel demand.
Despite the attacks, major shipping companies such as Maersk and France’s CMA CGM have resumed transit through the Red Sea. That is after the U.S. deployed a multinational task force to the region.
Impact on global supplies
“Despite shutting down shipping channels and re-routing vessels, how far the global supplies are impacted is still debatable,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
German company Hapag-Lloyd could decide whether to resume shipments through the Red Sea today, Wednesday. The prospect of a long-term Israeli military campaign in Gaza remains the main driver of market sentiment. Israel’s Chief of Staff Herzi Halevi on Tuesday told reporters that the Gaza war would go on “for many months”.
Read: Dollar faces strain amidst rate cut speculations in holiday trading
Oil stocks
The decline in oil prices also stalled on Wednesday as markets remain supported by speculation that the US Federal Reserve will begin cutting interest rates in 2024. Lower interest rates reduce borrowing costs, which can stimulate economic growth and increase oil demand.
A preliminary poll conducted by Reuters on Tuesday revealed that U.S. crude stocks were expected to fall by 2.6 million barrels last week. Whereas, distillate and gasoline inventories were likely to rise.
The American Petroleum Institute industry group and the Energy Information Administration (EIA) are set to release their inventory reports today and Thursday, respectively. This is a day later than usual for both reports due to the Christmas holiday.
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