Oil prices jumped by more than one percent, in early Asian trading on Tuesday, to start the new year on the rise, as a naval clash in the Red Sea draws attention to a possible disruption of supplies from the Middle East, and expectations of Chinese economic stimulus have strengthened demand expectations in the world's largest crude importer.
Price action
By 0319 GMT, Brent crude rose $1.37, or 1.8 percent, to $78.40 per barrel.
US West Texas Intermediate crude recorded $72.79 per barrel, an increase of $1.14, or 1.6 percent.
The risk of the conflict between Israel and the Gaza Strip turning into a broader regional conflict increased over the weekend after US helicopters repelled an attack Sunday by Houthi militants on a Maersk container ship in the Red Sea, which led to the sinking of three Houthi ships and the killing of 10 militants, according to officials. Americans, Maersk and Houthis.
The expansion of the conflict in Gaza could lead to the closure of vital waterways for transporting oil supplies, such as the Red Sea and the Strait of Hormuz in the Gulf.
Leon Li, an analyst at CMC Markets in Shanghai, said the oil price may be affected by the worsening situation in the Red Sea at the weekend and the peak demand season during the Chinese New Year in early February.
He added that the expected demand during the holidays raises expectations for a price recovery in January.
Government data showed on Sunday that investors' expectations for new stimulus measures in China were strengthened by the contraction in manufacturing activity in December for the third month in a row.
However, a private sector report on Tuesday showed growth last month, despite a decline in factory owners’ confidence in 2024 expectations compared to November.
