Oil near three-week high due to Middle East tension and China’s demand

Oil prices little changed in early Asian trading on Tuesday, hovering near their highest levels in three weeks due to escalating tensions in the Middle East and a recovery in Chinese demand.

According to Reuters, Brent crude futures fell eight cents to $83.48 per barrel by 0133 GMT. US West Texas Intermediate crude for April delivery fell 10 cents to $78.36 a barrel.

The March West Texas Intermediate crude contract rose 26 cents to $79.45 a barrel, with traders preparing for this contract to expire during the day.

Tony Sycamore, a market analyst at IG, said in a note that crude oil markets were “slightly lower” in “quiet trading during the Presidents’ Day holiday in the United States, and with demand concerns outweighing the ongoing geopolitical tension in the Middle East.”

The Iran-aligned Houthis continued their attacks on shipping lanes in the Red Sea and the Bab al-Mandab Strait, where at least four other ships have been hit by drones and missiles since Friday. The Houthis said one of them, the Belize-flagged, British-registered, Lebanese-operated cargo ship Rubimare, was at risk of sinking in the Gulf of Aden, raising the stakes in their campaign to disrupt global shipping in solidarity with Palestinians in Gaza.

“Signs of strong demand in China also boosted sentiment,” ANZ analysts wrote in a note.

Tourism revenues in China rose 47.3% year-on-year and exceeded pre-Covid-19 levels during the Lunar New Year holiday, which ended on Saturday.

China also lowered its benchmark interest rate for real estate loans by more than expected on Tuesday, in an attempt to support the real estate market and economy.

However, price supportive factors did not fully offset demand concerns. Last week, the International Energy Agency’s report revised downward its oil demand growth forecast for 2024 amid expectations that renewable energy will replace fossil fuels.