Brent declines as shipping firms gear up to operate in the Red Sea

The front-month ICE Brent contract moved $1.61/bbl lower on the day, to trade at $77.71/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures found some support after the US Energy Information Administration (EIA) reported an unexpected drop in US crude inventories.

Commercial US crude inventories fell by massive 7.11 million bbls, to 436.57 million bbls on 22 December, according to the latest EIA data. The weekly stock draw ran counter to the American Petroleum Institute's (API) projection of a 1.84 million bbls build on Wednesday.

The country's gasoline stocks also fell by 669,000 bbls over the week, to 226 million bbls, indicating strong holiday season demand.

Additionally, global crude oil demand is expected to rise with the US Federal Reserve's anticipated interest rate cuts in 2024. Lower US interest rates and a subsequent weaker dollar potentially lead to lower borrowing costs for commodities like oil and bolster demand.  

Downward pressure:

Brent’s price gains were capped after a few shipping companies announced plans to resume operation in the Red Sea trade route.

“Oil [Brent] prices are falling as more shipping companies say they will depart and traverse the Red Sea,” said Price Futures Group’s senior market analyst Phil Flynn.

Earlier this week, Danish shipping giant Maersk said it has scheduled container vessels to transit via the Suez Canal over the coming days.

“There is confidence growing by these companies that an increased US military presence will give the Iranian-backed Houthis rebels some pause before they decide whether to attack a vessel,” Flynn added.

Commercial vessels transiting through the southern part of the Red Sea have been exposed to terror attacks by Houthi militants. This is in retaliation to Israel’s refusal of a ceasefire in the Gaza Strip.

By Aparupa Mazumder

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