Oil steadies as traders consider Middle East situation

London — Oil prices were largely stable on Tuesday, as investors weighed signals of a Gaza ceasefire against the reality on the ground in the Middle East.

Brent crude futures fell 10c, or 0.12%, to $82.43 a barrel by 9.23am GMT, while West Texas Intermediate was down 7cs, or 0.09%, to $77.51 a barrel.

“Concerns about 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 in Gaza, where Israel is waging a war against Hamas, have increased freight rates and shipping times. On Monday, US Central Command said the Houthis had unsuccessfully fired a missile at the US-flagged oil tanker Torm Thor in the Gulf of Aden on February 24.

In a sign of de-escalation in the conflict, however, US President Joe Biden said on Tuesday that Israel has agreed to halt military activities in Gaza for the Muslim holy month of Ramadan, as Hamas studied a draft proposal for a truce that includes a pause in fighting and a prisoner-hostage exchange.

Oil prices were also supported by indications of improved demand in China, the world’s biggest crude consumer.

“Concerns over Chinese demand are abating, as refineries continue brisk buying in the physical market after a boom in Lunar New Year travel,” analysts from ANZ Bank said in a note.

Also on Tuesday, Russian authorities announced a six-month ban on petrol exports from March 1 to compensate for rising demand and to enable planned maintenance of refineries.

Both oil benchmarks had settled more than 1% higher on Monday, which followed declines of as much as 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 signalled 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.

US inflation is central to any Fed decision on rate cuts, and January’s US personal consumption expenditures price index, the Fed’s preferred measure of inflation, is due on Thursday.

The American Petroleum Institute industry group’s weekly US crude inventories data is due to be released at 9.30pm GMT.

Analysts surveyed on Monday estimated on average that crude inventories rose by about 1.8-million barrels in the week to February 23.

Elsewhere, eyes are on the Opec+ producer group, with a decision coming in March of whether to extend voluntary production cuts to bolster prices.

“We expect Opec+ to announce the rollover of voluntary production quotas, at least until the June ministerial meeting to provide additional support,” Helima Croft of RBC Capital Markets said in a note on Monday.

Reuters