Oil prices rose sharply on Monday on rising tensions in the Middle Ease due to recent attacks on ships crossing the Red Sea.
The attacks on Red Sea shipping by Houthi militants in Yemen have forced the suspension of some shipments through the Suez Canal, raising supply concerns.
According to reports, five of the world’s six largest shipping companies have announced they will not send ships through the Red Sea. British oil giant BP and Taiwan’s Evergreen became the latest to suspend transit.
However, oil gave up some gains later on amid uncertainty about the outlook for interest rates following hawkish comments from a couple of Fed officials.
New York Fed chief Williams said that a March cut seems ‘premature’, tempering market speculation about imminent rate cuts.
Also, Fed Bank of Chicago President Austan Goolsbee said on Sunday in an interview on CBS that it’s too early to declare victory over inflation fight, and interest-rate decisions would depend on incoming data.
West Texas Intermediate Crude oil futures for January ended higher by $1.04 at $72.47 a barrel.
Brent crude futures were up $1.53 or about 2% at $78.08 a barrel a little while ago.
“There’s still a lot of uncertainty and debate around the demand outlook for next year and it would appear the prospect of many rate cuts has boosted the odds of a softer landing which could support demand and may have done the same to the price in recent days,” says Craig Erlam, Senior Market Analyst at OANDA, UK & EMEA.
“Markets may have become overly optimistic about cuts next year. Then there’s also the risk that past cuts could have an even more dampening impact on the global economy or that OPEC+ compliance is as weak as the deal indicated it could be,” he adds.
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