Crude Holds Gains On Middle East Tensions, But Supply/Demand Remains Focus

Crude has held onto Friday’s gains during APAC trading today with WTI up 0.1% to $72.74/bbl and Brent +0.2% to $78.44/bbl. The benchmarks are off their intraday highs of $72.91 and $78.63 respectively. Further reports of Houthi attacks on Red Sea shipping provided support but oil markets remain concerned regarding excess supply and slowing demand. The USD index is flat.

• Houthi attacks on Red Sea shipping and the US/UK retaliation on Friday have increased concerns that the conflict could spread outside of Israel/Gaza and potentially become region-wide. While this is not the base case, crude remains on edge re any further escalation of the situation as the region accounts for around a third of global oil, according to Bloomberg. Iran supports Hamas and the Houthis.
• Three firms are redirecting tankers away from the southern Red Sea accounting for 350 vessels, according to Bloomberg.
• China unexpectedly left the 1-year MLF rate unchanged when a 10bp cut had been forecast. This development didn’t weigh on prices, even though China is the world’s largest crude importer.
• US markets are either closed or have shortened trading hours today due to the Martin Luther King holiday. The World Economic Forum is running in Davos. In terms of data, there is euro area IP and trade.