Oil prices rose 1.5% in the first session of the New Year, driven by potential supply disruptions in the Middle East following a naval conflict in the Red Sea and strong holiday demand and hopes for an economic revival in China, the largest importer of crude oil.
Brent crude rose $1.20, or 1.5%, to $78.24 a barrel by 0438 GMT. West Texas Intermediate crude was at $72.66 a barrel, up $1, or 1.4%.
One survey had predicted Brent crude would average $82.56 per barrel this year, slightly above the 2023 average of $82.17. Analysts think weak global growth will limit demand, but geopolitical tensions will likely provide support.
An attack by Iranian-backed Houthi militants on a Maersk container ship in the Red Sea was repelled on Sunday. Three Houthi ships were sunk and 10 militants were killed; This increases the risk of the Israel-Gaza war turning into a broader regional conflict.
The oil price may be affected by the escalation of the situation in the Red Sea over the weekend and when demand peaks during China’s Spring Festival. The forecast for holiday demand in China also increases expectations for a price recovery in January.
Following the naval battle, an Iranian warship set out for the Red Sea, Iranian media reported on Monday. A broader conflict brings to the agenda the closure of important waterways that transport oil supplies, such as the Red Sea and the Strait of Hormuz in the Gulf.
At least four tankers carrying diesel and jet fuel from the Middle East and India to Europe are sailing around Africa to avoid the Red Sea, ship tracking data shows.
Government data published on Sunday showed that investors’ expectations for new stimulus measures in China increased after manufacturing activity in December contracted for a third month.
A stimulus could boost economic growth, and this potentially boost oil demand in the world’s second-largest oil-consuming nation, and also support prices.
