Oil remains steady as developments in the Red Sea are monitored by Reuters

© Reuters. Crude oil tanks are seen in an aerial photo at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base/File Photo

By Jeslyn Lerh

SINGAPORE (Reuters) – Oil prices were steady on Wednesday after strong gains the previous day as investors watched developments in the Red Sea, with some major carriers resuming passage through the area despite continued attacks and wider tensions in the Middle East.

Futures were up 15 cents, or 0.2%, at $81.22 a barrel by 0730 GMT, while U.S. West Texas Intermediate crude was down 8 cents, or 0.1%, at $75.49 a barrel.

Benchmarks settled more than 2% higher in the previous session as fresh attacks on ships in the Red Sea raised concerns about disruption to shipping, on top of hopes of a U.S. interest rate cut that could boost economic growth and fuel demand.

Despite attacks by Iran-backed Yemeni Houthi militias, major shipping companies such as Maersk and France’s CMA CGM have resumed sailing through the Red Sea following the deployment of a multinational task force to the region.

“Despite the closure of shipping channels and the diversion of vessels, the extent to which global supply is affected is still debatable,” said Priyanka Sachdeva, chief market analyst at Phillip Nova.

Germany’s Hapag-Lloyd is expected to decide Wednesday on resuming deliveries across the Red Sea.

The prospect of a prolonged Israeli military campaign in Gaza also remains a major driver of market sentiment.

Israel’s chief of staff, Herzi Halevi, told reporters on Tuesday that the war in Gaza would continue for “many months.”

Oil also remained supported by speculation that the US Federal Reserve will start cutting interest rates in 2024. Lower interest rates reduce borrowing costs, which can stimulate economic growth and spur demand.

A preliminary Reuters poll on Tuesday showed inventories fell by 2.6 million barrels last week, while distillates and gasoline inventories likely rose.

Inventory reports from the American Petroleum Institute, an industry group, and the Energy Information Administration, the statistics arm of the U.S. Department of Energy, are expected on Wednesday and Thursday, respectively, a day later than usual for both reports due to the Christmas holiday.