Oil prices rose in Asian trade on Tuesday, recovering slightly from steep losses in 2023 as US forces struck back against the Iran-backed Houthi group in the Red Sea, with the conflict showing little signs of de-escalation.
Disruptions in the region, particularly in shipping routes through the Suez Canal, had spurred some gains in oil prices earlier in December.
But oil prices marked a dismal final trading week of 2023, as the launch of a US-led task force to enforce security in the region saw an increasing number of shipping firms resume routes through the Suez Canal.
USOIL 4-hour chart
Brent oil futures expiring in March jumped 1.2% to $77.94 a barrel. West Texas Intermediate crude futures rose 1.1% to $72.60 a barrel. Trading volumes were dull, with some significant markets closed for the New Year holidays.
Oil prices mark steep losses in 2023, outlook dim
Both contracts shed over 10% each in 2023, under pressure from persistent concerns over sluggish demand and higher-than-expected supply conditions. An economic rebound in top importer China failed to materialise in the year, while production cuts from the Organization of Petroleum Exporting Countries and allies (OPEC+) largely underwhelmed markets.
Weak economic data from China also continued to pile in, as purchasing managers’ index readings for December showed more deterioration in business activity- notably in the manufacturing sector.
However, the steep annual losses in crude attracted some bargain buying at the beginning of the new year. Traders also held out for any more production cuts from the OPEC+. However, signs of discord in the production group kept expectations low after Angola’s unexpected exit.
With US production remaining at record highs in recent weeks, global oil markets are expected to be less tight than anticipated in the first quarter of 2024. This notion and signs of weakening demand in China are expected to keep oil prices subdued.
Still, crude prices may see some near-term relief amid growing optimism over early interest rate cuts by the Federal Reserve. Nonfarm payroll data due this Friday is expected to provide more cues on the path of interest rates.
A weaker dollar also afforded some strength to oil prices.
