Oil prices turn lower despite escalating Red Sea tensions, Maersk shipping pause

0



Oil futures fell on Tuesday afternoon to kick off the new year, giving up the sharp gains seen in early trading after an Iranian warship entered the Red Sea — heightening tensions and fears of potential crude-supply disruptions caused by attacks on shipping vessels by Iran-backed Houthi rebels in Yemen.

Price action

  • West Texas Intermediate crude for February delivery
    CL00,
    -1.54%

    CL.1,
    -1.54%

    CLG24,
    -1.54%
    was down $1.2, or 1.7%, to $70.44 a barrel on the New York Mercantile Exchange, after trading as high as $73.64 in the morning session.

  • March Brent crude
    BRN00,
    +0.24%

    BRNH24,
    +0.24%,
    the global benchmark, fell $1.1, or 1.5%, to $75.92 a barrel on ICE Futures Europe, after setting a session high at $79.06.

  • February gasoline
    RBG24,
    -0.20%
    dropped 0.8% to $2.09 a gallon, while February heating oil
    HOG24,
    +0.08%
    was nearly flat at $2.52 per gallon.

  • February natural gas
    NGG24,
    +1.91%
    rose 1.1% to $2.35 per million British thermal units.

Market drivers

Oil prices rose briefly in early morning trading on Tuesday after news reports on Monday that an Iranian warship had entered the Red Sea. The reports cited Iran’s semi-official Tasnim news agency, which didn’t provide details of the ship’s mission.

The U.S. military said Sunday that its forces opened fire on Houthi rebels after they attacked a cargo ship in the Red Sea, killing several rebels and destroying three boats in an escalation of the maritime conflict linked to the war in Gaza.

Meanwhile, Danish shipping giant Maersk
MAERSK.A,
+6.18%

MAERSK.B,
+6.38%
said on Tuesday that it will pause all transit through the Red Sea and the Gulf of Aden until further notice following an attack on one of its vessels on Dec. 30.

Oil prices rose after the start of the Israel-Hamas war in October, but the risk premium attached to fears of a wider conflict in the region soon evaporated. Crude has seen periodic price jumps sparked by fears of potential escalation but still fell sharply over the course of the fourth quarter, with both Brent and WTI ending 2023 with a yearly loss, their first since 2020.

Uncertainty over the demand outlook, a rise in U.S. production to record levels above 13 million barrels a day, and doubts about the unity of the Organization of the Petroleum Exporting Countries (OPEC) have served to undercut support for crude.

With demand “expected to remain subdued due to a global economic slowdown and U.S. crude production at record levels, the recovery may be destined to remain limited and short lived,” said Charalampos Pissouros, senior investment analyst at XM, in a note.



Source link

About The Author

Leave a Reply

Your email address will not be published. Required fields are marked *