Oil prices fell on Friday ahead of the long Christmas holiday weekend on expectations that Angola could increase production after leaving OPEC, but rose throughout the week on positive US economic news and concerns that Houthi ship attacks would increase supply costs.
Large shippers are charging extra fees to reroute ships.
Brent futures fell 32 cents, or 0.4%, to settle at $79.07 a barrel, while West Texas Intermediate (WTI) crude fell 33 cents, or 0.5%, to settle at $73.56.
Thus that left both benchmarks up about 3% for the week after gaining less than 1% last week.
The attacks caused disruptions in the Suez Canal, which carries about 12 percent of world trade.
More shipping companies said they were avoiding the Red Sea because of attacks on ships by the Iran-backed Houthi militant group. Major shippers Maersk and CMA CGM said they would impose extra charges in connection with the rerouting of ships.
Oil prices were affected by the situation in the Red Sea not only due to direct interruptions in supply but also due to increased freight rates and insurance costs.
Meanwhile, in Africa, Angola’s decision to leave the Organization of Petroleum Exporting Countries (OPEC) could pave the way for Beijing to increase investment in the country’s oil and other sectors. Angola produces approximately 1.1 million barrels of oil per day.
However, It will take time for Angola to raise oil production which may push prices downward in time if China moves in there with a massive investment.
Currently, US inflation data and Houthi attacks in the Red Sea are supporting oil prices.
Meanwhile in Iraq, oil ministry spokesman Asim Jihad confirmed Iraq’s support for the OPEC+ agreement and commitment to voluntary oil cuts.
The softer-than-expected arrival of important inflation data in the US increased investors’ optimism that the US Federal Reserve (Fed) will reduce borrowing costs next year.
Low interest rates reduce consumer borrowing costs, which can increase economic growth and oil demand.
Expectations that the Fed will be more likely to cut interest rates next year also helped the US dollar fall to its lowest level since July against other currencies for the second day in a row.
A weakening dollar could increase demand for oil by making fuel more expensive for buyers using other currencies.
However, not all economic news from the United States was positive.
Sales of new single-family homes in the U.S. fell to a one-year low in November, but the unexpected decline is likely temporary due to a chronic shortage of pre-owned homes that underpins demand for new construction.
