Oil rises on geopolitical tension in the Middle East

Singapore — Oil prices rose in Tuesday trade as geopolitical tension in the Middle East continued to spur concern, but gains were limited on bearish demand sentiments and as the market waited for monthly reports from oil agencies.

Brent futures for May delivery was up 26c, or 0.3%, to $82.47 a barrel by 4.08am GMT. The US crude April contract rose 17c, or 0.2%, to $78.10 a barrel.

While the war between Israel and Palestinian group Hamas has not led to significant oil supply disruptions, Yemen’s Iran-aligned Houthis have been attacking ships in the Red Sea and Gulf of Aden since November in what they say is a campaign of solidarity with Palestinians.

Air strikes attributed to a US-British coalition hit port cities and small towns in western Yemen on Monday, while the Houthis said on Tuesday they had targeted what was described as the “US ship Pinocchio” in the Red Sea with missiles.

Capping gains, however, are the outlooks for weaker demand and increasing supply from producers outside oil cartel Opec.

“Bearish demand sentiments and growing non-Opec supply leave little room for the market to be bullish on oil prices at this time,” said Serena Huang, head of APAC analysis at Vortexa.

The International Energy Agency (IEA) expects oil supply to grow to a record high of about 103.8-million barrels a day, almost entirely driven by producers outside Opec and its allies (Opec+), including the US, Brazil and Guyana.

Meanwhile, China’s crude oil imports rose in the first two months of the year versus the same period in 2023, but they were weaker than the preceding months, continuing a trend of softening purchases by the world’s biggest buyer.

In the meantime, the market was awaiting demand estimates from monthly reports by Opec, the IEA and the Energy Information Administration, analysts from ANZ said in a note.

“While we believe the estimates will be largely unchanged, any upside surprise will ease demand concerns.”

Reuters