Oil prices stabilize as market weighs US economic concerns
Oil prices stabilized in early Asian trade on Wednesday after sharp moves earlier in the week, as markets weighed concerns about the US economy. Crude oil slipped 1 cent, or 0.01%, to $75.88 a barrel, while US West Texas Intermediate crude futures rose 4 cents, or 0.06%, to $70.42 a barrel. The market fell in the previous session as market optimism about early and aggressive US interest rate cuts ebbed ahead of the release of Federal Reserve minutes and jobs data.
Tensions in Red Sea raise concerns of potential supply disruptions
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 market optimism about early and aggressive US interest rate cuts ebbed ahead of the release of Federal Reserve minutes and jobs data.
Market optimism wanes as investors await Fed minutes and jobs data
Energy markets were unable to escape the broader pressure seen on risk assets with equity markets also weaker. The weakness in oil comes despite a ratcheting up in tensions in the Middle East. Expectations of ample 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.
Expectations of ample supply hold oil prices in check
While the geopolitical situation is a concern for the oil market, a fairly comfortable oil balance over the first half of 2024 does help to ease some of these worries. Given the scale of cuts we are already seeing, it will be increasingly difficult for the group to cut more if needed over the course of 2024, they said, pointing to the fact that recent cuts have been driven by voluntary reductions, rather than group-wide cuts.
Weekly inventory reports to provide insight into crude stockpiles
Ahead of weekly 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.
Analyst comment
Neutral news: Oil prices stabilize as market weighs US economic concerns.
Analyst prediction: The market is expected to remain relatively stable as investors await the release of Federal Reserve minutes and jobs data. Concerns about the US economy may continue to impact oil prices, but tensions in the Middle East could also have an influence. Weekly inventory reports will provide further insight into crude stockpiles.
