Concern about shipping disruptions in the Red Sea supports rebound in prices, offsetting a more hawkish Fed, says IG analyst Tony Sycamore
27 February 2024 - 08:13
byArathy Somasekhar and Andrew Hayley
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Houston/Beijing — Oil prices on Tuesday mostly held onto gains made a day earlier amid attacks on shipping in the Red Sea that have compounded supply worries.
Brent crude futures fell 1c to $82.52 a barrel by 4.35am GMT, while US West Texas Intermediate crude futures (WTI) rose 1c to $77.59 a barrel.
“Concerns around shipping disruptions in the Red Sea have supported a rebound in the price of crude oil overnight, offsetting a more hawkish Fed currently weighing on the demand side of the equation,” said Tony Sycamore, an analyst at IG in Sydney.
The attacks by Iran-aligned Houthis in support of Palestinians have increased freight rates and shipping times. On Monday, US Central Command said that the Houthis had unsuccessfully fired a missile at the US flagged oil tanker Torm Thor in the Gulf of Aden on February 24.
US President Joe Biden said on Monday he hoped to have a ceasefire in the Israel-Hamas conflict in Gaza start by next Monday. In public, Israel and Hamas continued to take positions far apart on a possible truce, while blaming each other for delays.
Both oil benchmarks settled more than 1% higher on Monday which followed declines of 2%-3% over the previous week as markets factored in a greater likelihood that rate cuts might take longer to come.
Kansas City Federal Reserve Bank president Jeffrey Schmid on Monday used a debut speech on policy to signal that he, like most of his central banking colleagues,is in no rush to cut interest rates. High borrowing costs typically reduce economic growth and oil demand.
Oil prices were also supported on Tuesday by indications of improved demand in China.
“Concerns over Chinese demand are abating, as refineries continue brisk buying in the physical market after a boom in Lunar New Year travel. This is despite them having planned more maintenance halts than usual,” analysts from ANZ Bank said in a note.
A market focus for the day will be the American Petroleum Institute industry group’s weekly data on US crude inventories which is due to be released at 4.30pm.
Analysts polled by Reuters on Monday estimated on average that crude inventories rose by about 1.8-million barrels in the week to February 23.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil retains earlier gains amid Red Sea attacks
Concern about shipping disruptions in the Red Sea supports rebound in prices, offsetting a more hawkish Fed, says IG analyst Tony Sycamore
Houston/Beijing — Oil prices on Tuesday mostly held onto gains made a day earlier amid attacks on shipping in the Red Sea that have compounded supply worries.
Brent crude futures fell 1c to $82.52 a barrel by 4.35am GMT, while US West Texas Intermediate crude futures (WTI) rose 1c to $77.59 a barrel.
“Concerns around shipping disruptions in the Red Sea have supported a rebound in the price of crude oil overnight, offsetting a more hawkish Fed currently weighing on the demand side of the equation,” said Tony Sycamore, an analyst at IG in Sydney.
The attacks by Iran-aligned Houthis in support of Palestinians have increased freight rates and shipping times. On Monday, US Central Command said that the Houthis had unsuccessfully fired a missile at the US flagged oil tanker Torm Thor in the Gulf of Aden on February 24.
US President Joe Biden said on Monday he hoped to have a ceasefire in the Israel-Hamas conflict in Gaza start by next Monday. In public, Israel and Hamas continued to take positions far apart on a possible truce, while blaming each other for delays.
Both oil benchmarks settled more than 1% higher on Monday which followed declines of 2%-3% over the previous week as markets factored in a greater likelihood that rate cuts might take longer to come.
Kansas City Federal Reserve Bank president Jeffrey Schmid on Monday used a debut speech on policy to signal that he, like most of his central banking colleagues,is in no rush to cut interest rates. High borrowing costs typically reduce economic growth and oil demand.
Oil prices were also supported on Tuesday by indications of improved demand in China.
“Concerns over Chinese demand are abating, as refineries continue brisk buying in the physical market after a boom in Lunar New Year travel. This is despite them having planned more maintenance halts than usual,” analysts from ANZ Bank said in a note.
A market focus for the day will be the American Petroleum Institute industry group’s weekly data on US crude inventories which is due to be released at 4.30pm.
Analysts polled by Reuters on Monday estimated on average that crude inventories rose by about 1.8-million barrels in the week to February 23.
Reuters
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