Oil holds steady as Red Sea developments monitored By Reuters

By Jeslyn Lerh

SINGAPORE (Reuters) -Oil prices were stable on Wednesday after the previous day’s strong gains as investors monitored Red Sea developments, with some major shippers resuming passage through the area despite continued attacks and broader Middle East tensions.

futures rose 15 cents, or 0.2%, to $81.22 a barrel by 0730 GMT, while U.S. West Texas Intermediate crude eased 8 cents, or 0.1%, to $75.49 a barrel.

The benchmarks settled more than 2% higher in the previous session as fresh attacks on ships in the Red Sea prompted fears of shipping disruptions, on top of hopes of U.S. interest rate cuts that could boost economic growth and fuel demand.

Despite the attacks by Yemen’s Iran-backed Houthi militia, major shipping firms such as Maersk and France’s CMA CGM were resuming passage through the Red Sea following the deployment of a multinational task force to the region.

“Despite shutting down shipping channels and re-routing vessels, how far the global supplies are impacted is still debatable,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Germany’s Hapag-Lloyd is expected to decide whether to resume shipments through the Red Sea on Wednesday.

The prospect of a prolonged Israeli military campaign in Gaza also remains a major driver of market sentiment.

Israel’s Chief of Staff Herzi Halevi told reporters on Tuesday that the Gaza war would go on “for many months”.

Oil also remained supported by speculation that the U.S. Federal Reserve will begin to lower interest rates in 2024. Lower interest rates reduce borrowing costs, which can stimulate economic growth and fuel demand.

stocks were expected to have fallen by 2.6 million barrels last week, while distillate and gasoline inventories likely rose, a preliminary Reuters poll showed on Tuesday.

Inventory reports from the American Petroleum Institute industry group and the Energy Information Administration, the statistical arm of the U.S. Department of Energy, are expected on Wednesday and Thursday, respectively, a day later than normal for both reports due to the Christmas holiday.