Oil jumps over 2% on US demand hopes and Red Sea tensions

New York — Oil prices rose on Thursday to highest since early December after US economic data showed faster-than-expected growth in the last quarter and as tensions in the Red Sea kept disrupting global trade.

Brent futures rose $1.85, or 2.31%, to $81.89 a barrel and West Texas Intermediate crude gained $1.76, or 2.34%, to $76.85.

Geopolitical tensions in the Middle East and the disruption of shipping in the Red Sea corridor remained in focus.

Maersk said explosions forced two ships operated by its US subsidiary that were carrying US military supplies to retreat when they were transiting the Bab al-Mandab Strait off Yemen, accompanied by the US Navy.

Meanwhile, Yemen’s Houthi leader said the group would continue targeting ships linked to Israel until aid reaches the Palestinian people in Gaza.

“We are finally seeing energy markets wake up to the distinct possibility that these supply chain disruptions will rumble on for months yet,” said Joshua Mahony, chief market analyst at Scope Markets.

“The prospect of a military solution to ensure safe passage looks unlikely,” he added.

In the US, a larger-than-expected draw in crude inventories last week, primarily because of extreme cold, also supported prices. US inventories fell by 9.2-million barrels last week, according to the Energy Information Administration.

Data on Thursday showed the US economy grew at a faster pace than expected in the fourth quarter, a positive demand indicator, Bob Yawger, director of energy futures at Mizuho, said.

Oil prices also drew support from expectation China’s economy is recovering after the central bank announced a deep cut in bank reserves on Wednesday.

Elsewhere, however, the prospect of sustained high interest rates loomed.

The European Central Bank on Thursday retained its record-high benchmark rate of 4%, giving no hint that policymakers were contemplating policy easing.

Update: January 25 2024
This story has been updated with new oil prices.

Reuters