Oil Prices Soar on Positive US Data, Red Sea Tensions

January 26, 2024
Oil Prices fall

By Adedapo Adesanya

Oil prices went up on Thursday as US economic data showed faster-than-expected growth in the last quarter and as tensions in the Red Sea kept disrupting global trade.

Brent crude futures appreciated by $2.39 or 2.99 per cent to $82.43 a barrel and the US West Texas Intermediate (WTI) crude futures gained $2.27 or 3.02 per cent to quote at $77.36 per barrel.

Data on Thursday showed the US economy grew at a faster pace than expected in the fourth quarter, a positive demand indicator.

The Bureau of Economic Analysis’ advanced gross domestic product (GDP) in the world’s largest oil producer estimate showed a 3.3 per cent annualized rate increase in the last quarter.

Geopolitical tensions in the Middle East and the disruption of shipping in the Red Sea corridor remained in focus as global shipping giant, Maersk, said explosions forced two ships operated by its US subsidiary that were carrying U.S. military supplies to retreat when they were transiting the Bab al-Mandab Strait off Yemen, accompanied by the U.S. Navy.

Yemen’s Houthi leader said on Thursday the group would continue targeting ships linked to Israel until aid reaches the Palestinian people in Gaza.

Analysts say the energy markets are seeing the possibility that these supply chain disruptions will continue for a long time.

Although the attacks have not affected oil prices, it has led to increased risks, which can lead to further rise in prices.

In the US, a larger-than-expected draw in crude inventories last week, primarily because of extreme cold, also supported prices.

US crude inventories fell by 9.2 million barrels last week, according to the Energy Information Administration (EIA).

Support also came from China after the central bank announced a deep cut in bank reserves on Wednesday, a move that analysts say could boost oil demand.

However, pressure came as the European Central Bank on Thursday retained its record-high benchmark rate of 4 per cent.

The move gave no hint that policymakers were contemplating policy easing, signalling that other countries may also follow the same path.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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