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Updated December 27th, 2023 at 11:16 IST

Oil prices retreat; shipping firms resume navigation through Red Sea

Market sentiment also remains underpinned by speculation surrounding the potential reduction of interest rates by the US Federal Reserve in 2024.

Reported by: Business Desk
Crude Oil
Crude Oil | Image:Unsplash
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Oil prices declined in Asian trading, partially erasing robust gains from the previous session. Brent crude futures dropped by 18 cents, or 0.22 per cent, settling at $80.89 a barrel, while US WTI crude futures were down 22 cents, or 0.29 per cent, at $75.35 a barrel.

Tuesday witnessed a surge of over 2 per cent in prices, reaching the highest point this month and extending the momentum from the previous week's 3 per cent climb. This upward trajectory was fuelled, in part, by expectations of US interest rate cuts that could spur economic growth and increase oil demand.

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However, the ongoing Israeli military campaign in Gaza and the consequential attacks on ships in the Red Sea continue to exert significant influence on market dynamics. Israel's Chief of Staff, Herzi Halevi, stated on Tuesday that the Gaza conflict would persist "for many months," and Yemen's Houthi militia claimed responsibility for a missile attack on a container ship in the Red Sea.

Despite these challenges, major shipping firms like Maersk and CMA CGM are gradually resuming navigation through the Red Sea following the deployment of a multinational task force. Germany's Hapag-Lloyd is expected to decide on resuming shipments on Wednesday.

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Market sentiment also remains underpinned by speculation surrounding the potential reduction of interest rates by the US Federal Reserve in 2024. This speculation gained traction after Friday's data indicated that inflation, as measured by key indicators like the personal consumption expenditures (PCE) price index, is now at or below the central bank's 2 per cent target. Lower interest rates, if implemented, could stimulate economic growth and bolster oil demand.

In terms of inventory, a preliminary Reuters poll on Tuesday suggested an anticipated 2.6 million barrel decline in US crude stocks for the previous week, while distillate and gasoline inventories were expected to rise. The American Petroleum Institute and the Energy Information Administration are set to release their inventory reports on Wednesday and Thursday, respectively, a day later than usual due to the Christmas holiday.

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(With Reuters inputs)
 

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Published December 27th, 2023 at 08:40 IST

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