Oil prices fell due to the strong US dollar, but losses were limited due to tensions in the Middle East
Crude oil futures were lower on Tuesday due to a stronger U.S. dollar, but the decline was curbed by ongoing tensions in the Middle East that have hampered tanker shipments and threatened crude supplies in the region.
price action
West Texas Intermediate Crude CL00,
-1.24% CL.1,
-1.24% CLG24,
-1.24%
February delivery fell 32 cents, or 0.4%, to $72.36 per barrel on the New York Mercantile Exchange. Nymex WTI futures were not settled on Monday due to the Martin Luther King Jr. Day holiday.March Brent crude oil BRN00,
-0.59% BRNH24,
-0.59% ,
Global benchmark ICE Futures Europe was down 8 cents, or 0.1%, at $78.07 a barrel after falling 0.2% on Monday.February gasoline RBG24,
+0.42%
added 1.2% to $2.1459 per gallon, February heating oil HOG24;
+0.48%
It rose 1.2% to $2.7003 per gallon.Natural gas NGG24 for February delivery,
-10.47%
It was trading down 11.8% at $2.921 per million British Thermal Units.
market drivers
“The weakness in oil prices on Tuesday is likely to persist in the near term as the situation in the Red Sea looks very volatile,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. For now, the U.S. dollar is contributing to lower oil prices, he said.
The ICE U.S. Dollar Index DXY rose 0.9% to 103.288 in Tuesday trading. A stronger dollar could make dollar-priced oil more expensive for foreign buyers.
Samer Hasn, market analyst at . “This was eventually reflected in a further rise in Treasury yields since last Friday and restored strength against the US dollar.”
Meanwhile, Iran-backed Houthi rebels operating in Yemen on Monday vowed to continue attacking US and international targets in the Red Sea in response to Israel’s operations in Gaza, news reports said. U.S. Central Command said a Houthi missile struck the U.S. bulk carrier Gibraltar Eagle on Monday but did not cause any serious injuries or damage.
Crude oil futures rose on Friday after U.S. and British troops launched an offensive against Houthi rebels, but remained well above intraday highs and recorded weekly losses. Meanwhile, data shows a significant decline in tanker traffic through the Red Sea and the Bab el-Mandeb waterway, a vital gateway.
Crude has gained some support over events near the Red Sea and Strait of Hormuz, but has struggled to build a geopolitical risk premium since the Israel-Hamas war began in October. The shipping problem was attributed to an increase in U.S. crude oil exports.
read:Why Red Sea chaos is driving oil buyers ‘into the arms of American shale producers’
“For commodity markets, increased tensions create supply risks, with energy markets being the most vulnerable. However, for oil and LNG (liquefied natural gas), we are not yet seeing a fundamental impact on supply,” ING analysts Ewa Manthey and Warren Patterson said in a note.
“Refiners and consumers may initially face some pressure as supply chains adapt to longer routes. “Given uncertainty and spillover risks, oil prices are likely to enjoy relatively good support,” they wrote. “A significant rise in oil prices would require further increases and/or meaningful loss of oil supplies.”
Natural gas prices have fallen sharply in the U.S. despite winter weather hitting many parts of the country.
Natural gas markets have seen some gains, but Tyche Capital Advisors’ Zahir said he sees a “buying opportunity.”
“If we see more freezes across the country in the coming weeks, we could see supply shrinking quite quickly,” he told MarketWatch. The next few weeks will certainly be weather-related and “variable.”
