Crude Steady Despite Stronger US Dollar As Middle East Remains Volatile

Oil prices are little changed today with WTI down 0.2% to $72.54/bbl but Brent is 0.2% higher at $78.29/bbl, after falling briefly below $78 to a low of $77.87. Further problems in the Middle East have provided support while the greenback rose again (USD BBDXY up 0.3%) and risk continued its pullback.

• Tensions in the Middle East and risks that conflict spreads remain high. A US merchant vessel was hit by a Houthi missile on Monday and Iran attacked targets in northern Iraq in retaliation for the Soleimani Memorial attack, which killed almost 100 people.
• Central banks are monitoring the situation for the impact it may have on inflation, with shipping rates rising due to longer routes. Qatar is now shipping LNG to Europe via southern Africa, according to Bloomberg. The ECB has indicated that it may be too soon to ease policy given geopolitical uncertainties and sticky inflation.
• Given strong non-OPEC supply, so far oil markets are not too concerned about rising tensions in the region that produces a third of the world’s crude or delays to seaborne shipments.
• Later the Fed’s Waller speaks on the economic outlook and monetary policy (information here), ECB’s Villeroy participates in a Davos panel and BoE’s Bailey speaks. On the data front there is January US Empire manufacturing, UK employment/wages and Canada’s CPI.