Oil prices rose for a third day, with geopolitical risks in the Middle East persisting and their impact partly mitigated by a report showing expanding inventories in the United States.
Brent crude approached $79 a barrel after rising 1.6% during the previous two sessions, while West Texas Intermediate crude approached $74. The Houthis said they targeted two ships in the southern Red Sea, the latest incident in a series of attacks that dramatically changed the course of global trade. The United States pledged more strikes against Iranian forces and their proxies in the region.
The industry-funded American Petroleum Institute said U.S. crude oil inventories rose by 674,000 barrels last week, according to people familiar with the data. As gasoline inventories expanded, the volume of inventory in the Cushing Center expanded. The Energy Information Administration will release official numbers later Wednesday.
The price of crude oil is slightly higher than it was at the start of the year, with the risk premium associated with the war in the Middle East eliminated and transportation costs falling largely due to the fragile macroeconomic outlook. The lackluster price action reveals a boom in oil derivatives trading, with total open interest across major futures rising to its highest levels since March 2022.
Expectations of an early shift to rate cuts this year have faded, with swap markets anticipating a 20% rate cut in March. Cleveland Fed President Loretta Mester said policymakers want to see more evidence that inflation is cooling.
The focus on oil markets has shifted more to macroeconomics after months of uncertainty over supply and demand, said Charu Chanana, an analyst at Saxo Capital Markets in Singapore. He added: Trading within the range is likely to continue until interest rate cuts approach.
At the same time, there are initial signs that Israel and Hamas are close to agreeing to a cessation of hostilities. The Qatari Prime Minister said that Hamas provided a positive response to the proposal to stop fighting in the Gaza Strip in exchange for the release of some Israeli hostages.
