© Reuters.
Investing.com — Oil prices rose Tuesday as elevated tensions in the Middle East raised concerns that supplies through the key Red Sea region will be disrupted.
By 08:55 ET (13.55 GMT), the futures traded 0.1% higher at $72.82 a barrel and the contract climbed 0.5% to $78.58 a barrel.
Crude gains on Middle East tensions
Tensions remain elevated in the Middle East in the wake of the strikes by the United States and Britain against the Houthi group in Yemen, in retaliation for attacks by the Iran-backed group on shipping in the Red Sea.
This prompted the Houthi movement to state on Monday it will expand its targets in the Red Sea region to include U.S. ships.
Additionally, Iran said on Tuesday it had launched ballistic missiles at targets in Iraq and Syria in defence of its sovereignty and to counter terrorism. This followed Tehran seizing a tanker with Iraqi crude destined for Turkey on Thursday.
More oil tankers are now shunning the southern Red Sea, taking a longer (and more expensive) route to Asia which is indirectly tightening the market by forcing up oil stocks on water by 35 million barrels, according to Citi analysts.
Wavering global demand limits upside
That said, gains have been limited as concerns over wavering demand also remained in play, especially amid growing fears that global economic conditions will deteriorate further this year.
The German economy is likely to grow by only 0.3% in 2024, said the country’s BDI industry association, suggesting the eurozone as a whole, a key consumer of energy, will barely register growth this year.
“The economy is at a standstill in Germany. Compared to most other major industrialised countries, our country is falling further behind,” said BDI president Siegfried Russwurm. “We don’t see any chance of a rapid recovery in 2024.”
Wednesday sees the release of Chinese fourth-quarter data, with traders looking to see whether the world’s largest oil importer will match the government’s 5% annual growth target.
Additionally, and data for December are also due in the U.S. on Wednesday.
Fed rate cuts remain in focus
Uncertainty over U.S. interest rates has also been a major point of contention for markets, especially as recent signs of resilience in inflation gave the Federal Reserve less impetus to begin cutting rates early.
Hawkish comments from a number of European Central Bank officials on Monday have caused traders to push back against the idea of early rate cuts globally.
Attention now turns to a speech by Fed Governor later on Tuesday, an influential member of the central bank’s policy-setting committee.
Elsewhere, the U.S. market holiday on Monday will mean that official inventory data from the U.S. will arrive on Thursday, delayed by one day, while industry data from the arrives on Wednesday.
(Ambar Warrick contributed to this item.)
