Oil steadied on Tuesday, finding support from geopolitical tensions in the Middle East and investor optimism that the U.S. Federal Reserve would soon start cutting interest rates, boosting global economic growth and fuel demand.
While hopes of rate cuts and conflict in the Red Sea have led to a rebound in crude prices, Maersk’s announcement of a restart of shipping routes through the waterway has alleviated supply concerns to a certain extent, said CMC Market analyst Leon Li.
According to Sweetcrudereports, Brent crude futures rose 10 cents, or 0.1 per cent, to $79.17 a barrel by 0930 GMT while U.S. West Texas Intermediate crude slipped 25 cents, or 0.3 per cent, to $73.31.
Trade is thin because some markets are closed for public holidays.
Both oil benchmarks registered gains of about 3 per cent last week after Houthi attacks on ships disrupted global shipping and trade while the Israel-Hamas conflict shows no sign of easing.
Shipping companies had stopped sending vessels through the Red Sea and imposed surcharges for re-routing ships. The Red Sea connects with the Suez Canal, a major shipping route used for about 12 per cent of global trade.
Maersk’s statement on Sunday cited deployment of a US-led military operation designed to ensure the safety of commerce in the area.
Germany’s Hapag-Lloyd will decide on Wednesday how it will proceed with its Red Sea routes after suspending shipments there, a spokesperson said on Tuesday.
Separately, Iran on Monday denied a U.S. claim that a drone launched from Iran had struck a chemical tanker in the Indian ocean. The Pentagon had said that the ship was hit 200 nautical miles (370 km) off the coast of India.
Oil also found support from expectations that the Fed will cut interest rates next year after U.S. data on Friday showed that, by some key measures, inflation was now at or below the central bank’s 2 per cent target.
Lower interest rates cut consumer borrowing costs, which can boost economic growth and demand for oil.
