Oil prices steady as economic concerns offset Red Sea supply worries

Oil prices were little changed in Asian trade on Wednesday after sharp moves earlier in the week, as markets weighed concerns about the US economy against potential supply disruptions from ongoing tensions in the Red Sea.

Brent crude fell 1 cent, or 0.01 per cent, to $75.88 a barrel by 0733 GMT, while US West Texas Intermediate crude futures slipped 8 cents, or 0.11 per cent, to $70.3 a barrel.

Oil prices had climbed around $2 earlier in the week following attacks on vessels in the Red Sea by Houthi rebels over the weekend and the reported arrival of an Iranian warship on Monday. A wider conflict could close crucial waterways for oil transportation and disrupt trade flows.

However, the market fell in the previous session as optimism about early and aggressive US interest rate cuts ebbed ahead of the release of Federal Reserve meeting minutes and jobs data.

“The geopolitical risks are not being priced in at the moment on assumption that a regional flare up will continue to be avoided,” said Suvro Sarkar, energy sector team lead at DBS Bank.

He said markets were expected to be choppy in the near term but muted overall in the first quarter compared with the second half of last year.

Expectations of ample oil supply in the first half of 2024 have kept a lid on prices ahead of OPEC+ plans to hold a meeting of its Joint Ministerial Monitoring Committee (JMMC) in early February. An exact date has not been decided, three sources from the alliance said.

OANDA’s senior market analyst Kevin Wong said the decision to hold the meeting in early February showed OPEC+ seemed to be getting uneasy about current weak oil market conditions because voluntary cuts of 2.2 million barrels a day for the first quarter agreed at the previous meeting on Nov. 30 had failed to stabilise the market.

“Due to a lack of fresh catalysts, WTI oil is likely to trade sideways in the short term between $68.90 and $72.30 a barrel (close to the downward-sloping 20-day moving average),” he added.

Ahead of weekly US crude and product inventory reports, analysts polled by Reuters expected crude stockpiles fell last week, while distillate and gasoline stocks likely rose.

Data from the American Petroleum Institute industry group is due at 4:30 p.m. (2130 GMT) on Wednesday, and data from the Energy Information Administration, the statistical arm of the US Department of Energy, is due at 11:00 a.m. (1600 GMT) on Thursday, delayed by a day due to the New Year’s holiday on Monday.