HOUSTON: Oil prices slipped on Thursday with Yemen’s Houthi militia expected to halt attacks on ships in the Red Sea, and as strong US retail data reinforced the Federal Reserve’s cautious approach to cutting interest rates.
Brent crude futures were down 74 cents, or 0.9%, to $81.29 per barrel as at 10:52 a.m. EST, after rising 2.6% in the previous session to their highest since July 26.
US West Texas Intermediate crude futures were down $1.12, or 1.4%, to $78.92 a barrel, after gaining 3.3% on Wednesday to their highest since July 19. Maritime security officials said on Thursday they were expecting the Houthi militia to announce a halt in attacks on ships in the Red Sea, after a ceasefire deal in the war in Gaza between Israel and the militant group Hamas.
The attacks have disrupted global shipping, forcing firms to reroute to longer and more expensive journeys around southern Africa for more than a year. Elsewhere, US retail sales increased in December as households bought motor vehicles and a range of other goods, pointing to strong demand in the economy, further bolstering the Federal Reserve’s cautious approach to cutting interest rates this year.
“No one can make a case that the Fed has any urgent need to cut interest rates from this retail sales report,” said Carl Weinberg, chief economist at High Frequency Economics. Lower interest rates can stimulate economic growth and increase oil demand.
Investors also continued to weigh the Biden administration’s latest round of sanctions targeting Russia’s military industrial base and evasion schemes, after earlier levying broader sanctions on Russian oil producers and tankers. Moscow’s top customers are now scouring the globe for replacement barrels, while shipping rates have surged too.
With Donald Trump being sworn in for his second term on Monday, “the market is approaching the ‘wait-and-see’ phase and awaits the reaction from the incoming US administration on the issue” of sanctions, said Tamas Varga at oil broker PVM. Pricier oil may also lead to clashes between Trump and the Organization of the Petroleum Exporting Countries, if the incoming president follows his previous playbook. During his first term, Trump demanded the producer group rein in prices whenever Brent climbed to around $80 a barrel.
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