Oil prices climbed on Thursday following reports of an oil tanker being boarded by an armed group in Oman, raising concerns about escalating conflict in the Middle East. Brent crude futures rose 1.3% to $77.83 a barrel, while U.S. West Texas Intermediate crude futures gained 1.4% to $72.35. The incident in Oman, coupled with the largest attack by Yemen-based Houthis on commercial shipping in the Red Sea and intensified Israeli strikes in Gaza, contributed to heightened geopolitical tensions. However, gains were limited by a surprise build in U.S. crude stockpiles, raising concerns about demand in the world’s largest oil market.
Geopolitical Tensions Impact Oil Markets
The armed boarding incident in Oman, combined with recent events in the Middle East, has led to increased concerns about oil supply disruptions. The United States and Britain suggested further measures in response to the attacks, while the United Nations Security Council passed a resolution demanding an immediate end to Houthi strikes. Geopolitical uncertainties, coupled with market participants’ concerns about slowing demand, have contributed to a sense of paranoia about oil prices, according to Barclays. The bank adjusted its 2024 Brent forecast to $85 a barrel, lowering it by $8.
Surprise U.S. Crude Stockpile Build Weighs on Oil Benchmarks
Oil benchmarks experienced a decline on Wednesday after U.S. crude inventories unexpectedly rose by 1.3 million barrels to 432.4 million barrels in the week ended Jan. 5, contrary to analyst expectations for a draw of 700,000 barrels. This unexpected build in U.S. crude stockpiles raised uncertainties about demand dynamics in the global oil market. While geopolitical tensions continue to influence oil prices, market participants are closely monitoring U.S. inflation data, which will provide insights into potential shifts in the Federal Reserve’s interest rate policies.
Chinese Refiners Seek Less Saudi Crude Amidst Global Oil Dynamics
Chinese refiners have reportedly requested reduced volumes of Saudi crude oil for February, despite Saudi Arabia announcing its largest price cut in 13 months. This move by Chinese refiners reflects changing dynamics in the global oil market and may be influenced by factors such as geopolitical tensions, demand considerations, and price trends. China’s customs administration is set to release December trade data, offering a comprehensive view of overall demand in the world’s largest oil-importing nation. The evolving dynamics in key oil-consuming regions continue to shape the outlook for the global oil market.