Shipping companies resume traffic through the Red Sea

Oil prices fell in early Asian trading, on Wednesday, paring strong gains achieved in the previous session as major shipping companies began to return to the Red Sea despite ongoing attacks and escalating tensions in the Middle East.

Brent crude futures fell 18 cents, or 0.22 percent, to $80.89 a barrel by 0101 GMT. US West Texas Intermediate crude futures fell 22 cents, or 0.29 percent, to $75.35 per barrel.

On Tuesday, prices rose more than two percent to their highest levels this month, continuing the upward momentum that occurred last week, which saw prices rise more than three percent, due in part to growing hopes for a cut in US interest rates, which could boost economic growth and increase demand. .

However, the possibility that the Israeli military campaign in Gaza will continue for a long period and that the conflict will spill over into attacks on ships in the Red Sea remain key drivers of market sentiment.

Israeli Chief of Staff Herzi Halevy told reporters on Tuesday that the war in Gaza would continue “for several months,” while the Iranian-backed Yemeni Houthi group claimed responsibility for a missile attack on a container ship in the Red Sea.

Despite the attack, major shipping companies such as Denmark’s Maersk and France’s CMA CGM have resumed transit through the Red Sea after a multinational task force was deployed to the region. The German company Hapag-Lloyd is expected to announce its decision regarding the resumption of traffic in the region on Wednesday.

American interest

Markets are still supported by speculation that the Federal Reserve will begin lowering interest rates in 2024, after data on Friday showed that inflation is now at or below the central bank’s target of two percent, through some key measuring indicators. Such as the personal consumption expenditures price index.

Lower interest rates reduce borrowing costs, which can stimulate economic growth and increase demand for oil.

A preliminary poll conducted by Reuters on Tuesday showed that US crude inventories are expected to decline by 2.6 million barrels last week, while distillate and gasoline inventories are likely to rise.

Inventory reports from the American Petroleum Institute and the Energy Information Administration are expected to be released on Wednesday and Thursday, respectively, a day later than usual for both reports due to the Christmas holiday.

Leave a comment