HOUSTON: Oil prices rose on Tuesday as tensions in the Middle East stoked future supply concerns, but gains were subdued by continually high interest rates which may weigh on energy demand.
Brent futures were up 43 cents at $82.43 a barrel by 10:58 EST (15:58 GMT). US West Texas Intermediate (WTI) crude was 54 cents higher at $77.46 a barrel.
Oil prices were near flat in Monday trade after gaining 6% last week, with the conflict in the Middle East keeping prices elevated. US, Egyptian, Israeli and Qatari officials were expected to meet in Cairo on Tuesday to seek a truce in Gaza as more than a million civilians crammed into Rafah, a southern corner of the Palestinian enclave, waiting in fear of an Israeli assault.
“Oil prices have been numbed into submission by what has transpired, or not, in the Middle East,” said John Evans of oil broker PVM in a note on Tuesday. One “untoward act, missile or sudden peace agreement and crude prices will move $10/barrel”.
Yemen’s Iran-aligned Houthis have kept up their attacks in the Red Sea, claiming solidarity with Palestinians and striking vessels with commercial ties to the US, Britain and Israel.
But changing expectations over the path of US interest rates have limited price gains, with recent central banker comments dashing market speculation of rate cuts early this year.
US consumer prices rose more than expected in January amid rises in the costs of shelter and healthcare, data on Tuesday showed, but the pick-up in inflation is unlikely to change expectations that the Federal Reserve will start cutting interest rates in the first half of this year.
If inflation worries delay Fed rate cuts, that could dampen economic growth and hit oil demand.
The dollar rose to three-month peaks on Tuesday after the data reinforced expectations that the Fed will hold interest rates in March. The stronger dollar reduces demand for dollar-denominated oil for buyers paying in other currencies.
British inflation and euro zone gross domestic product data should land on Wednesday. Germany, the powerhouse of Europe’s economy, is not in recession and is expected to grow in 2024, Chancellor Olaf Scholz’s chief of staff Wolfgang Schmidt said on Tuesday.
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