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Oil prices slip as shipping giants return to the Red Sea

Published 12/26/2023, 08:55 PM
Updated 12/27/2023, 09:19 AM
© Reuters.
- -- Oil prices fell Wednesday, handing back some of the previous session’s gains, as shipping companies returned to the Red Sea despite fresh attacks, stabilizing supplies through this crucial region.

By 09:15 ET (14.15 GMT), the U.S. crude futures traded 0.4% lower at $75.27 a barrel and the Brent contract dropped 0.3% to $80.59 a barrel.

Shipping giants reschedule Red Sea routes

Both the benchmark contracts gained over 2% on Tuesday as further attacks by Yemen's Iran-backed Houthi militia on ships in the Red Sea prompted more fears of shipping disruptions.

However, major shipping firms such as Maersk and France's CMA CGM have resumed passage through the Red Sea following the deployment of a multinational task force to the region.

Denmark's Maersk said on Wednesday it has scheduled several dozen container vessels to travel via the Suez Canal and the Red Sea in the next several weeks, in a further sign that global shipping firms are returning to the route.

Germany's Hapag-Lloyd is also expected to decide whether to resume shipments soon.

U.S. added to its strategic reserve

The crude market had also received a boost earlier this week with the news that the United States has agreed to purchase three million barrels of oil to help replenish the Strategic Petroleum Reserve.

The Biden administration had conducted sales last year, including a record one of 180 million barrels, to help control oil prices after Russia’s invasion of Ukraine.

U.S. inventories delayed a day 

Focus was now on U.S. inventory data, due later on Wednesday and Thursday, for more cues on supply in the world’s largest fuel consumer. 

The release of this week’s inventory data was delayed by a day, due to the Christmas holiday on Monday.

A series of builds in U.S inventories over the past few weeks have rattled oil markets, especially as rising gasoline and distillate stockpiles pointed to cooling fuel demand in the country.

Oil set for 2023 losses

Despite recent gains, Brent and WTI futures were still set to lose around over 6% each in 2023. 

Concerns over top importer China - as an economic rebound failed to materialize - were a major weight on prices, as were fears of a slowdown in global crude demand due to high interest rates and inflation.

Oil supplies are also expected to be less tight than initially expected in early-2024, following underwhelming production cuts from the Organization of Petroleum Exporting Countries, while U.S. output remained at record highs. 

(Ambar Warrick contributed to this article.)


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