Oil set for first monthly gain since September on Red Sea unrest

Oil headed for its first monthly gain since September as an escalation of attacks on ships in the Red Sea spurred a diversion of tanker traffic and raised fears about a wider conflict in the Middle East.

Global benchmark Brent edged lower Wednesday and traded near $83 a barrel, but was still up over 7% this month, while West Texas Intermediate slipped toward $77 a barrel. The market is also waiting for a US response to a drone assault that killed American troops in Jordan over the weekend.

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President Joe Biden said he has made a decision on how to respond, without providing details, adding that Iran was responsible for providing the weaponry used in the strike. Tehran has denied involvement and urged the US to use diplomacy to ease tensions.

“All eyes are on Biden’s next move and that will likely determine the market’s direction,” said Will Sungchil Yun, a Seoul-based senior commodities analyst at SI Securities Corp.

US lawmakers have been pressing Biden to retaliate for the strike that killed three American troops, the first by enemy fire since the Israel-Hamas war began in October. The challenge for the president is to project toughness without spurring a jump in oil prices in an election year.

An escalation of attacks in the Red Sea by Yemen-based Houthi rebels has pushed oil higher this month, but robust supply and concerns about demand from key consumers including China has kept a lid on the gains. Saudi Arabia’s surprise reversal of plans to boost output has also raised questions about the long-term demand outlook.

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Prices:
  • Brent for March settlement, which expires on Wednesday, fell 0.3% to $82.60 at 12:33 p.m. in Singapore
    • The more-active April contract dipped 0.3%
  • WTI for March delivery slipped 0.3% to $77.60 a barrel

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Source: moneyweb.co.za