In the first trading session of the New Year, oil prices surged by 1.5 percent, influenced primarily by the United States' role in escalating tensions in the Middle East, notably after a naval confrontation in the Red Sea. Additionally, expectations of robust holiday demand in China, a major oil importer, further jacked prices.
Brent crude experienced a rise of $1.20, or 1.5 percent, reaching $78.24 per barrel by 04:38 GMT. Simultaneously, US West Texas Intermediate crude stood at $72.66 per barrel, marking an increase of $1, or 1.4 percent.
A Reuters survey of economists and analysts forecast an average Brent crude price of $82.56 per barrel for 2024, slightly above last year's $82.17 average. Analysts believe that lackluster global growth could temper demand. However, geopolitical tensions, like US involvement in several provocative acts in Syria, Iraq, etc., are expected to cause a spike in oil prices.
The recent sinking of three Houthi vessels and the loss of 10 militants has intensified disquiet about the potential expansion of the Israel-Gaza conflict into a broader regional crisis.
Leon Li, an analyst with CMC Markets in Shanghai, remarked to the press on the situation, stating that the escalation in the Red Sea and the approaching Chinese Spring Festival could significantly impact oil prices. Li further highlighted that the anticipated surge in Chinese holiday demand might further exacerbate price pressures in January.
Washington's escalation in the region prompted Tehran to send a warship to the Red Sea, and it has already entered the area, according to Iranian sources. This further heightened apprehensions about the likelihood of disruptions in key maritime routes.
Consequently, tracking data revealed that several tankers transporting essential oil products from the Middle East and India to Europe have opted to circumnavigate Africa to avoid the Red Sea.