Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Oil settles up on Red Sea tensions; gains capped by US stock builds

Published 12/19/2023, 08:59 PM
Updated 12/20/2023, 03:36 PM
© Reuters. FILE PHOTO: A container ship crosses an oil platform at the Gulf of Suez towards the Red Sea before entering the Suez Canal, outside of Cairo, Egypt September 1, 2020. REUTERS/Amr Abdallah Dalsh/File Photo

By Laura Sanicola

(Reuters) -Oil prices settled slightly higher after a choppy trading session on Wednesday as investors worried about global trade disruption and tensions in the Middle East following attacks on ships by Yemen's Iran-aligned Houthi forces in the Red Sea.

Limiting price gains were a surprise U.S. crude inventory build, larger than expected fuel stocks gains and record domestic oil production.

Brent crude futures settled up 47 cents, or 0.6%, at $79.70 a barrel, while U.S. West Texas Intermediate crude settled up 28 cents, or 0.4%, to $74.22 a barrel.

Both benchmarks briefly turned negative following the EIA report and the possibility of a new ceasefire after the leader of Hamas paid his first visit to Egypt for more than a month.

Early in the session, the benchmarks rose by more than $1 as major maritime carriers chose to steer clear of the Red Sea route, with longer voyages increasing transport and insurance costs.

On Wednesday, Greece advised commercial vessels sailing in the Red Sea and the Gulf of Aden to avoid Yemeni waters. Greek ship owners control about 20% of the world's commercial vessels in terms of carrying capacity.

"The possibility of a significant price downturn would appear likely on first suggestion of stabilization of cargo transits through the Red Sea corridor," said John Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

On Tuesday, Washington launched a task force to safeguard commerce in the region. Sources including shipping and maritime security officials told Reuters that few practical details are known about the initiative or whether it will directly engage in the event of further armed attacks.

The Houthis vowed to defy the U.S.-led naval mission and to keep targeting Red Sea shipping in support of Palestinian enclave Gaza's ruling Hamas movement.

About 12% of world shipping traffic passes up the Red Sea and through the Suez Canal. Although oil supply has been realigned, no shortages have yet emerged, analysts said.

"As long as production is not threatened, the market will eventually adjust to changing supply routes," said Ole Hansen, an analyst at Saxo Bank.

ECONOMIC GREEN SHOOTS

Recent data suggests central bank action to quell sticky inflation in Europe had made a meaningful difference.

German producer prices fell more than expected in November, data showed on Wednesday, a day after it was confirmed that euro zone inflation slowed sharply to 2.4% last month on a year-on-year basis.

A European Central Bank policymaker cautioned it was "rather unlikely" interest rates would be cut during the first six months of next year.

© Reuters. FILE PHOTO: A container ship crosses an oil platform at the Gulf of Suez towards the Red Sea before entering the Suez Canal, outside of Cairo, Egypt September 1, 2020. REUTERS/Amr Abdallah Dalsh/File Photo

In Britain, inflation plunged in November to its lowest rate in more than two years, strengthening the case for rate cuts.

On Tuesday, the U.S. Energy Department said the government bought 2.1 million barrels of crude for delivery in February, as the U.S. continues to replenish reserves.

Latest comments

Time to torpedo all Hootie (sic on purpose) boats on sight.  They've proved that they're out there for one reason.
Useless… aren’t you ashamed of posting the same thing over and over?
Not until it happens.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.