SINGAPORE, Jan 2 (Reuters) – Oil prices jumped 1% on
Tuesday, starting the New Year higher as a Red Sea naval clash
focused attention on potential Middle East supply disruptions
and expectations of Chinese economic stimulus boosted the demand
outlook in the world’s top crude importer.
Brent crude rose $1.03, or 1.3%, to $78.07 a barrel
by 0225 GMT while U.S. West Texas Intermediate crude was
at $72.53 a barrel, up 88 cents, or 1.2%.
The risks of the Israel-Gaza conflict morphing into a wider
regional conflict rose over the weekend after U.S. helicopters
repelled an attack on Sunday by Iran-backed Houthi militants on
a Maersk container vessel in the Red Sea, sinking three Houthi
ships and killing 10 militants, according to accounts by
American, Maersk, and Houthi officials.
Iran also supports Hamas, the ruling faction in Gaza
fighting Israel, and other groups Tehran back across the Middle
East have launched attacks on U.S. forces in the region and
Israel. A wider conflict could close crucial waterways for the
transportation of oil supplies such as the Red Sea and the
Straits of Hormuz in the Gulf.
“The oil price may be affected by the escalation of the
situation in the Red Sea over the weekend and the peak demand
season during China’s Spring Festival,” Leon Li, a
Shanghai-based CMC Markets analyst said, referring to the
Chinese New Year holiday set for early February.
He added that the forecast holiday demand is raising
expectations for a price rebound in January.
Following the naval battle, an Iranian warship has sailed
into the Red Sea, Iranian media reported on Monday.
At least four tankers transporting diesel and jet fuel from
the Middle East and India to Europe are taking the longer route
around Africa to avoid the Red Sea, ship tracking data show.
CHINA STIMULUS
Investors’ expectations for fresh stimulus measures in China
rose after manufacturing activity in December shrank for a third
month, government data showed on Sunday. However, a private
sector report on Tuesday showed an expansion in the sector last
month, though factory owners’ confidence in the 2024 outlook
declined from November.
The prospect of slowing global economic growth and growing
concerns of rising supply especially from producers outside the
Organization of the Petroleum Exporting Countries (OPEC) caused
Brent and WTI to fall more than 10% in 2023 to close out the
year at their lowest year-end levels since 2020.
Brent crude would average $82.56 a barrel in 2024, a
Reuters poll showed on Friday, as analysts predicted weak global
growth would cap demand, while geopolitical tensions could
provide support. Brent averaged $82.17 in 2023.
(Reporting by Florence Tan; Editing by Christian Schmollinger)
Read More: Oil jumps 1% in New Year after U.S. forces repel Houthis in Red Sea – 2024-01-01