Oil falls in early Wednesday trade
Oil prices fell in early Wednesday trade, as concerns over Middle East tensions were mitigated by a broad tone of risk-off across markets and a stronger US dollar, Bloomberg reported.
Brent crude dropped by 0.83 per cent, or 0.65 cents, to trade at $77.70 a barrel at 02:59 am CDT.
West Texas Intermediate (WTI) declined by 0.86 per cent, or 0.62 cents, to trade at $71.78 a barrel.
China released conflicting data in Asia, emphasising that the major crude importer hasn’t yet recovered.
Moreover, The US dollar continued to rise on currency markets following its largest one-day increase since March of last year, as traders adjusted their expectations regarding the Federal Reserve’s timing of rate cuts. That was detrimental to commodities.
Meanwhile, Middle East tensions continue to be a major concern, as the Red Sea attacks still pose a threat to shipping in the waterway off their coast. At the same time, concerns about the expansion of the Israeli war on Gaza would spread across the region.
Some insurers are beginning to avoid covering the U.S. and U.K. ships against war risk when they use the Red Sea waterway which is a strong indicator of standoff effects in the navigation movement. Furthermore, a lot of gas and oil carriers steer clear of the waterway, which forces them to take a longer path around southern Africa.
Since the beginning of the year, oil prices have been limited because production hasn’t been directly impacted by the Middle East crisis.
Later on Wednesday, traders will have two perspectives on the outlook: The Organisation of Petroleum Exporting Countries (OPEC+) will release its monthly market assessment, and a US industry group will release estimates for crude stockpiles.
“The good news, and the likely reason why oil benchmarks have not surged, is that global oil supply from the attacks in the Red Sea have not been affected,” Vivek Dhar, an analyst at Commonwealth Bank of Australia told Bloomberg.
“The bad news is that the alternative route around Africa takes 14 days longer.” She added.
Notably, following Beijing’s data on Wednesday, which revealed that retail sales fell short of expectations and real estate investments were still having difficulty, broader financial markets, including stocks, saw a decline. Crude eased along with industrial commodities like copper.
In the U.S. Over half of North Dakota’s oil production has been shut down and refinery operations in the processing hub of Texas have been curtailed due to freezing temperatures. The North Dakota Pipeline Authority reported that up to 650,000 barrels per day are offline, up from 425,000 barrels on Monday.
