Feb 1, 2024: Oil prices experienced an uptick in Asian trading on Thursday as concerns about Middle Eastern supplies persisted due to escalating military activities in the Red Sea. Additionally, anticipation of an upcoming OPEC+ meeting added to market caution.
The U.S. reportedly targeted unmanned drones in Western Yemen that were being prepared for launch, following a deadly drone strike against a U.S. base in Jordan. The persistent conflict in the Middle East has disrupted shipping routes through the Red Sea, raising fears of potential delays in oil deliveries to Europe and Asia.
Supply disruption concerns served as a significant factor supporting oil prices in January, helping to break a three-month streak of losses. Brent oil futures for April delivery rose 0.6% to $81.03 a barrel, while West Texas Intermediate crude futures gained 0.6% to $76.18 a barrel.
Despite the positive momentum, the uncertainty surrounding potential interest rate cuts and economic weakness in China weighed on crude oil prices. The Federal Reserve’s indication of higher-for-longer interest rates, without a rate cut in March, contributed to the dollar’s strength, hindering a more substantial rebound in oil prices.
Furthermore, weak economic signals from China, the world’s largest oil importer, added to concerns about slowing demand. Official data for January showed that manufacturing activity remained in contraction, reflecting little improvement in the country’s sluggish economic recovery.