Tensions Between Countries Drive Crude Higher

Oil prices were stronger on Tuesday but WTI outperformed Brent. Continued geopolitical risks to shipments following the death of US soldiers and a tanker fire after it was struck by a Houthi missile are supporting prices. OB is reporting that the number of tankers going around southern Africa has risen to 100 in the latest week from 69. A lower US dollar was also supportive with the USD index down 0.2%.

• US President Biden said that he did not want a war with Iran after 3 US troops were killed following a drone attack by Iranian-backed militants. Concern that the conflict in the Middle East could spread to Iran following the incident had also supported crude.
• WTI fell to an intraday low of $75.85 during the European session but then rose to be 1.3% higher at around $77.80/bbl, close to the intraday high of $78.14. It is now 8.3% higher in January. Key short-term resistance is at $79.56, November 30 high.
• Brent is up 0.7% to $82.40/bbl after reaching a high of $82.86. It rallied after falling to $80.83. The benchmark is now up 7.2% this month. Resistance is at $84.16, January 29 high.
• Venezuelan output reached 876kbd in December after the US eased sanctions but now if free elections aren’t held, the relief will be allowed to expire on April 18. The Venezuelan vice president said that an electoral calendar will be set before this deadline and offered candidates a guarantee.
• Bloomberg reported that US inventories fell a larger-than-expected 2.49mn barrels last week after 6.67mn, according to people familiar with the API data. Gasoline stocks rose 584k but distillate fell 2.13mn. The official EIA data is out later today.