Oil prices dropped by approximately 1% on Thursday, December 28, as worries about Red Sea shipping delays subsided despite lingering Middle Eastern tensions.
According to Reuters, as of 11:41 AM GMT, Brent futures for February were down 90 cents, or 1.1%, at $78.75 a barrel. Trading was slow because the contracts were about to expire, but the March contract was down 69 cents, or 0.9%, at $78.85 a barrel.
At $73.31 a barrel, West Texas Intermediate (WTI) oil futures were trading 80 cents lower, or a 1.1% decline. When big shipping companies started heading back to the Red Sea on Wednesday, December 27, oil prices fell around 2%.
As per a Reuters timetable breakdown published on Thursday, the majority of container ships operated by Maersk from Denmark will now use the Suez Canal as their primary route between Asia and Europe, with just a small number of vessels attempting to circumvent Africa.
Red Sea Crisis
Earlier this month, the Houthi terrorist group of Yemen started attacking vessels, disrupting global commerce. Major maritime firms, notably container titans Maersk and Hapag-Lloyd, ceased utilizing Red Sea routes and the Suez Canal as a result.
But concerted action has not materialized as expected from a coalition headed by the United States to defuse tensions in the Red Sea.
Many allies still dislike being linked to the marine force, even if it has been operational for a week. This is partially due to the rifts that the Gaza battle has exposed, as the US continues to firmly back Israel despite mounting international condemnation of its onslaught.
The ground conflict between Israel and Gaza has intensified significantly during the days leading up to Christmas. Israel's chief of military, Herzi Halevi, recently told reporters that the battle would continue for many months.
Anticipated Resurgence
After being postponed a day because of the Christmas holiday earlier this week, the US government will finally release its gasoline inventory statistics on Thursday.
Reuters surveyed seven experts, and their consensus was expecting a 2.7 million barrel decline in oil stockpiles for the week ending December 22. However, data released on Wednesday by the American Petroleum Institute industry organization indicated a mere 1.84 million barrel increase.
From the standpoint of oil demand, however, the growing likelihood of interest rate decreases in the US and Europe in 2024 is encouraging.
Speaking with Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, "The market is likely to try the upside again ... maybe in the early new year, also on expectations of a recovery in fuel demand thanks to monetary easing in the United States and higher kerosene demand during the winter in the northern hemisphere."
