Oil stabilises as investors watch for Red Sea developments

Oil stabilises as investors watch for Red Sea developments

By Robert Harvey

LONDON (Reuters) -Oil prices stabilised on Wednesday after the previous day’s strong gains as investors monitored Red Sea developments, with some major shippers resuming passage through the trade route despite continued attacks and broader Middle East tensions.

Brent crude futures was down 17 cents, or 0.21%, at $80.90 a barrel by 0940 GMT. U.S. West Texas Intermediate crude eased by 34 cents, or 0.45%, to $75.23 a barrel.

The benchmarks settled more than 2% up in the previous session as fresh attacks on ships in the Red Sea prompted fears of shipping disruption, with further price support from hopes of U.S. interest rate cuts that could boost economic growth and fuel demand.

Despite the attacks by Yemen’s Iran-backed Houthi militia, large shipping companies such as Maersk and France’s CMA CGM were resuming passage through the Red Sea after the deployment of a multinational task force to the region.

“Despite shutting down shipping channels and re-routing vessels, how far the global supplies are impacted is still debatable,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

The prospect of a prolonged Israeli military campaign in Gaza also remains a major driver of market sentiment.

Israel’s Chief of Staff Herzi Halevi told reporters on Tuesday that the Gaza war would go on “for many months”.

Elsewhere, oil loadings at the Russian Black Sea port of Novorossiisk were suspended because of a storm on Wednesday, sources told Reuters.

But crude exports from the Caspian Pipeline Consortium (CPC) terminal near the port have already resumed, Kazakhstan’s energy ministry said.

U.S. crude stocks were expected to have fallen by 2.6 million barrels last week while distillate and gasoline inventories were likely expected to have risen, a preliminary Reuters poll showed on Tuesday.

Inventory reports from the American Petroleum Institute and the Energy Information Administration are expected on Wednesday and Thursday respectively, a day later than normal for both reports because of the Christmas holiday.

(Reporting by Robert Harvey in London and Jeslyn Lerh in SingaporeAdditional reporting by Andrew Hayley in BeijingEditing by David Goodman)