Oil prices experienced a modest increase on Tuesday as market participants awaited developments from U.S. Secretary of State Antony Blinken’s Middle East trip, focusing on potential outcomes for the Gaza conflict and its impact on oil supplies. Brent crude futures saw a 17-cent rise to $78.16 per barrel, while U.S. West Texas Intermediate crude futures climbed by 16 cents to reach $72.94. Both contracts marked nearly a 1% gain on Monday, breaking a four-session decline.
Analysts noted the absence of signs indicating de-escalation in the Middle-Eastern crisis, which continued to provide some support to oil prices. Phillip Nova, a senior market analyst, mentioned ongoing concerns about the supply disruptions from the major oil-producing region.
During his trip, Blinken met with Saudi Arabia’s de-facto ruler on Monday, with hopes that the visit might contribute to a truce in the Gaza war before a potential Israeli assault on Rafah, a border city where a significant portion of the Gaza Strip population seeks shelter.
The proposed ceasefire, conveyed to Hamas last week through Qatari and Egyptian mediators, is awaiting a response from militants who seek additional guarantees for a conclusive end to the four-month-old conflict.
Simultaneously, the United States continued its efforts against the Iran-backed Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes.
However, apprehensions about the demand outlook imposed limitations on price gains. Analysts expressed concerns about the potential impact of “higher for longer” interest rates globally, anticipating a constriction in consumption. Additionally, signs of China’s economic challenges further contributed to these demand-related worries.
Leon Li, an analyst at CMC Markets, emphasized the difficulty of returning to previous price highs, citing increased layoffs and a potential long-term decline in oil demand.
On the supply side, industry data on U.S. crude stockpiles, expected later on Tuesday, remains a focal point. Five analysts polled by Reuters estimated an average rise of approximately 2.1 million barrels in crude inventories for the week ending Feb. 2.
BMI analysts anticipate a broadly balanced market throughout the year, projecting a moderate 3.4% increase in oil prices. However, they acknowledge risks to this outlook, citing uncertainties related to the global economy’s strength, the unfolding Red Sea crisis, and the evolution of OPEC+ policy, among other factors.