Oil prices see little change as investors put more focus on the geopolitical tensions in the Middle East. Furthermore, they remain more optimistic about interest rate cuts from the US Federal Reserve. This action might lead to a rise in the demand for fuel globally, leading to economic growth.
According to Reuters,
“Brent crude futures fell 26 cents, or 0.3%, to $79.13 a barrel by 0115 GMT while U.S. West Texas Intermediate crude was at $73.59 a barrel, up 3 cents. Trade is thin as some markets are still closed for the Boxing Day public holiday.”
Both types of crude oil showed 3% gains last week. This happened after ships came across Houthi attacks near Yemen. This caused global disruption in marine shipping and trade. Furthermore, it also added to tensions in the Middle East, especially the Israel-Gaza conflict.
Maersk, a Denmark-based logistics company, said on Sunday that it would resume its shipping operations soon in the Red Sea and the Gulf of Aden. Apart from that, they also cited the deployment of US-led military operations in the area to ensure the safety of shipping and business in the area.
Many shipping companies stopped vessel passage through the Red Sea, which also connects to the Suez Canal. This area is responsible for almost 12% of world trade. Also, these shipping companies are imposing surcharges for the re-routing of ships.
Investors are also expecting the Federal Reserve to cut interest rates next year. Moreover, as per US data, some key measures of inflation are currently below the central bank’s target (2%). If it lowers interest rates, it would cut consumers’ borrowing costs. This, in return, can boost economic growth and oil demand.