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Oil prices experienced an early uptick in Asian trading on Thursday, driven by persistent concerns over escalating tensions in the Middle East. These apprehensions overshadowed earlier worries about shipping traffic disruption, as some international shipping companies resumed activities in the Red Sea.
Market Movement:
Brent crude futures advanced by 0.3 percent, or 20 cents, reaching $79.85 per barrel in the early hours of Asian trading. Simultaneously, US West Texas Intermediate crude futures saw a 0.3 percent increase, gaining 24 cents and reaching $74.35 per barrel.
Market Dynamics:
Wednesday witnessed a 2 percent decline in oil prices as major shipping companies began returning to the Red Sea, alleviating concerns about navigation disruptions. However, persistent apprehensions about Middle East tensions, particularly related to Iran’s involvement, continued to influence market sentiment.
Industry Insight:
Hiroyuki Kikukawa, President of NS Trading, a unit of Nissan Securities, noted that while concerns about navigation in the Red Sea have eased, ongoing tensions in the Middle East, especially involving Iran, may present challenges for further price gains.
Shipping Resumptions:
Danish shipping company Maersk announced plans for dozens of container ships to transit through the Suez Canal and the Red Sea in the coming weeks. This decision followed a temporary halt to these routes earlier in the month due to attacks by the Yemeni Houthi group, aligned with Iran.
US Crude Inventories:
The market displayed limited reaction to the increase in US crude inventories reported for the week ending December 22. According to sources citing American Petroleum Institute figures, US oil inventories rose by 1.84 million barrels.
Conclusion:
Oil prices witnessed an early rise in Asian trading, driven by sustained concerns over Middle East tensions. The market’s response to shipping traffic concerns, which had prompted a decline earlier in the week, indicates the delicate balance between geopolitical factors and supply chain dynamics. Traders will likely continue monitoring developments in the Middle East for potential impacts on oil prices.
