Oil prices stable, focus on developments in the Red Sea

Oil prices witnessed little change today, Wednesday, at a time when investors are monitoring developments in the Red Sea, with some major shipping companies resuming passage through the region, despite the continuation of attacks and broader tension in the Middle East.

According to Reuters, Brent crude futures fell slightly, falling five cents, or 0.1 percent, to $81.02 per barrel by 0415 GMT, as well as US West Texas Intermediate crude, which fell 12 cents, or 0.2 percent, to $75.45 per barrel.

The two benchmarks ended the session yesterday, Tuesday, with an increase of more than 2%, as attacks on ships in the Red Sea fueled fears of disruption to shipping operations, in addition to the impact of growing hopes for lowering interest rates in the United States, which may enhance economic growth and increase demand for fuel.

Despite continued attacks by the Yemeni Houthi group allied with Iran, major shipping companies such as Denmark’s Maersk and France’s CMA CGM have resumed transit through the Red Sea after deploying a multinational task force in the region. The German company Hapag-Lloyd is expected to announce its decision regarding the resumption of traffic in the region today, Wednesday

The possibility of the Israeli military campaign in the Gaza Strip continuing for a long period remains one of the main drivers of market sentiment

Israeli Chief of Staff Herzi Halevy told reporters on Tuesday that the war in Gaza would continue “for several months.”

Among the factors that also limited the decline in oil prices today, Wednesday, is the continued support of the market with speculation that the Federal Reserve (US Central) will begin reducing interest rates in 2024.

Lower interest rates reduce borrowing costs, which can stimulate economic growth and increase demand for oil.

A preliminary poll conducted by Reuters on Tuesday showed that US crude inventories are expected to decline by 2.6 million barrels last week, while distillate and gasoline inventories are likely to rise.

Inventory reports from the American Petroleum Institute and the Energy Information Administration are expected to be released today, Wednesday, and tomorrow, Thursday, respectively, a day later than usual for both reports due to the Christmas holiday.