Crude oil prices saw a significant increase at the start of the week following U.S. strikes on the Yemeni Houthis. The U.S. Department of Defense announced that these attacks would continue until the Houthis cease their attacks on ships in the Red Sea.
As of the latest update, Brent crude was priced at $71.10 per barrel, and West Texas Intermediate was at $67.70 per barrel. Both prices rose since the market opened and are expected to climb higher, unless negative news, such as the Houthis agreeing to stop bombing ships, emerges.
The attacks have caused additional costs for the maritime industry, as ships are forced to take longer routes from Asia to Europe, adding weeks to the journey. This has also increased fuel demand from the industry.
“We are seeing a resurgence of geopolitical tensions,” said IG analyst Tony Sycamore to Reuters. “If crude oil prices rise above $68.50, we could see significant short covering in the market.”
Economic data from China sent mixed signals for the world’s largest crude importer. Industrial production slowed in the first two months of the year, but retail sales saw an uptick. In a positive development for oil demand, Chinese refinery throughput increased by 2.1% over the same period last year. This rise was driven by holiday travel and the addition of a new refinery at the end of last year, which increased refinery demand by 200,000 barrels per day, with another 200,000 barrels expected this month.
ING commodity analysts also pointed out that China’s property market is showing signs of stabilizing, although full recovery will take time. The property market has been a major challenge for Chinese economic planners and a key factor behind the bearish sentiment in global oil markets.
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