Oil settles up on Red Sea tensions; gains capped by US stock builds
LSEDec 28, 2023
As worries about shipping delays along the Red Sea route subsided on Thursday, oil prices dropped by nearly 1% despite the ongoing hostilities in the Middle East.
US WTI (WestTexas Intermediate) oil futures were trading 5 cents lower at $74.06 a barrel, while Brent crude futures increased 10 cents, or 0.1%, to $79.75 a barrel on Thursday.
President Biden had vowed to keep oil prices down. The administration is prepared to go to whatever lengths necessary to preserve market stability and low oil prices. Washington is dedicated to stabilizing freight transit in the Red Sea corridor, as evidenced by the formation of a task force last week to protect trade in the region. The Red Sea and Suez Canal handle about 12% of all marine traffic worldwide. Oil tankers were temporarily diverted, but the main shipping lines are again returning to the Red Sea route, which is encouraging news for the market.
The Israel-Palestinian conflict could have far-reaching economic consequences. A protracted conflict between the two sides not only has a substantial humanitarian toll but also threatens to bring about a new global economic shock. Important energy infrastructure, pipelines, refineries, and export terminals could be destroyed in the event of a full-scale conflict in the Middle East. This would send prices worldwide through the roof, which would only exasperate already existing issues with inflation. The world needs an immediate, lasting solution in Gaza to ensure maritime and energy security in the Red Sea and beyond.
There's a 50% chance that peak oil production be reached worldwide by December 2025, according to the Metaculus prediction community.