Oil Prices Inch Up as Middle East Trip by Top U.S. Diplomat Antony Blinken Raises Hopes of Gaza Ceasefire
Oil Prices Show Slight Increase
Oil prices inched up on Tuesday as investors awaited the outcome of a Middle East trip by top U.S. diplomat Antony Blinken. This trip raised hopes of a ceasefire in the Gaza war, which has sparked concerns about supplies from the major producing region.
Hope for De-escalation in Middle East Crisis
Futures rose 17 cents to $78.16 a barrel by 0704 GMT, while U.S. West Texas Intermediate crude futures climbed 16 cents to $72.94. Both contracts gained nearly 1% on Monday, rising for the first time in four sessions. Analysts are hopeful for signs of de-escalation in the Middle-Eastern crisis, which could extend support to oil prices.
Efforts for Ceasefire
Antony Blinken met with Saudi Arabia’s de-facto ruler on Monday. Palestinians are hoping that the visit will lead to a truce before a potential Israeli assault on Rafah, a border city where about half the Gaza Strip population is taking shelter. The ceasefire offer, delivered to Hamas last week by Qatari and Egyptian mediators, awaits a reply from militants who seek more guarantees that it will bring an end to the four-month-old war.
Continued U.S. Campaign Against Iran-backed Houthis
The United States continued its campaign against Iran-backed Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes.
Concerns About Demand Outlook
Despite the slight increase in oil prices, concerns about the demand outlook continue to limit price gains. Expectations of “higher for longer” interest rates in the United States and elsewhere, along with indications of China’s struggling economy, are likely to cap consumption.
Challenges in the Long Term
CMC Markets analyst Leon Li pointed out that it would be “difficult to return to previous highs” given the increasing layoffs. This suggests that in the long term, the demand for oil will decline.
Anticipation for Industry Data
Market participants are eagerly awaiting industry data due later on Tuesday on stockpiles. Analysts estimate that crude inventories rose by about 2.1 million barrels in the week to Feb. 2.
Expectation of Balanced Market
BMI analysts anticipate that the market will remain broadly balanced over the course of the year and that oil prices would rise moderately by 3.4%. However, they also see risks to the outlook both to the upside and the down, due to considerable uncertainties surrounding the strength of the global economy, the fallout from the unfolding Red Sea crisis, and the evolution of OPEC+ policy, amongst other things.
