Ongoing Middle East Tensions May Add War Premium To Crude

Oil prices have held onto the 3.5%-plus gains made on Wednesday during the APAC session today, as the factors driving it higher haven’t dissipated and US data showed a large stock drawdown. WTI is up 0.7% to $73.22/bbl, off the intraday low of $72.90. Brent is 0.5% higher at $78.62. The USD index is flat.

• Crude rose yesterday on OPEC reiterating its commitment to market stability, a terrorist attack in Iran adding to tensions in the region, shutdowns at Libyan oil fields worth 365kbd and the US announcing it will buy 3mn barrels for its SPR while last week there was a large US stock drawdown.
• The US and its allies have warned the Houthis that there will be consequences if they don’t stop attacking ships in the Red Sea. The UN said that 18 companies have now rerouted ships. There is a risk that if the situation deteriorates, a war risk premium will be added to oil prices again, which Goldman Sachs estimates could be $3-4/bbl. It expects Brent to stay in the $70-90/bbl range over 2024, according to Bloomberg.
• Bloomberg reported that US crude stocks fell 7.418mn barrels in the latest week, according to people familiar with the API data. But gasoline inventories rose 6.913mn and distillate 6.686mn. The official EIA data is out later today.
• Later the US December ADP employment and jobless claims print. There are also final S&P Global US/Europe composite/services PMIs for December. There are also preliminary December German and French CPIs.