LONDON: Oil prices maintained upward momentum on Tuesday as investors awaited the result of top U.S. diplomat Antony Blinken’s efforts in the Middle East to halt the Gaza war and quell tensions in a major oil-producing region.
Brent crude futures gained 55 cents to $78.54 a barrel by 1224 GMT, while U.S. West Texas Intermediate crude futures rose 48 cents to $73.26. Both contracts gained nearly 1% on Monday, rising for the first time in four sessions.
“The signs of de-escalation in the Middle-Eastern crisis are missing and continue to extend some support to ailing oil prices,” said Phillip Nova senior market analyst Priyanka Sachdeva.
As part of his trip to the region, Blinken met Saudi Arabia’s de-facto ruler on Monday, and on Tuesday landed in Cairo for his meeting with Egyptian President Abdel Fatah al-Sisi. Palestinians hope the visit will clinch a truce before a threatened Israeli assault on Rafah, a border city where about half the Gaza Strip population is sheltering.
Oil slips as rate cut caution overshadows Mideast strikes
The ceasefire offer, delivered to Hamas last week by Qatari and Egyptian mediators, awaits a reply from Hamas who say they want more guarantees it will end the four-month-old war.
At the same time, the United States continued its campaign against Iran-backed Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes. The group has described their recent attacks as acts of solidarity with Palestinians.
The U.S. strikes “do not point to an easing of tensions”, said Commerzbank analysts Thu Lan Nguyen and Carsten Fritsch in a note.
Yet souring demand expectations limited oil’s gains.
Analysts said expectations of “higher for longer” interest rates in the U.S. and elsewhere plus China’s shaky economy could cap consumption.
CMC Markets analyst Leon Li also said it would be “difficult to return to previous highs” given that the run of strong economic indicators from the U.S. would likely lose steam.
“Layoffs are still increasing. This means that in the long term, the (oil) demand will decline,” Li said.
On the supply side, market participants are awaiting industry data due later on Tuesday on U.S. crude stockpiles. Five analysts polled by Reuters estimated on average that crude inventories rose by about 2.1 million barrels in the week to Feb. 2.