Oil prices stable as investors focus on US rate cuts and concerns in the Middle East

26 Dec 2023 , 08:24 AM

Tuesday saw minimal movement in oil prices as investors’ attention was drawn to the Middle East’s geopolitical unrest and hopes that the US Federal Reserve would soon begin reducing interest rates, which would boost the world economy and drive demand.

U.S. West Texas Intermediate crude was up 3 cents to $73.59 per barrel by 01:15 GMT, while Brent crude futures dropped 26 cents, or 0.3%, to $79.13 a barrel.

Due to certain marketplaces remaining closed on Boxing Day, a public holiday, trade is light.

Following Houthi attacks on ships that hampered international trade and shipping and raised tensions in the Middle East as the Israel-Gaza war continued, both benchmarks saw increases of roughly 3% last week.

Citing the deployment of a U.S.-led military operation intended to protect the safety of commerce in the area, Denmark’s Maersk said on Sunday that it was getting ready to resume maritime operations in the Red Sea and the Gulf of Aden.

The Red Sea, which links to the Suez Canal, which handles 12% of global trade, has been closed to ship traffic, and shipping companies have levied fees for rerouting cargo.

A U.S. allegation that a drone launched from Iran had hit a chemical tanker in the Indian Ocean was refuted by Iran on Monday.

The Japanese-owned, Netherlands-operated Chem Pluto ship, flying the Liberian flag, was struck 200 nautical miles (370 km) off the coast of India, according to a statement released by the Pentagon over the weekend.

Expectations that the Fed will lower interest rates in 2024 also helped to drive up oil prices. On Friday, U.S. data was released, and several important metrics indicated that inflation was now at or below the central bank’s 2% target.

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