Oil prices are on the rise Tuesday after experiencing a short cool-down transitioning into the winter months. Prices are on the rise following geopolitical tensions in the Middle East and expectations the Federal Reserve would soon start cutting interest rates, potentially serving as a boost to fuel demand.
West Texas Intermediate is up $1.74 at $75.52 a barrel, while Brent Crude is up by $1.83 at $81.06 a barrel. These are some of the highest prices since the end of November, with prices steadily climbing even after the summer driving season had ended. Still, volume is relatively light due to the holiday season, with some markets closed.
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The gains made by oil can be pointed to conflict in the Red Sea, where oil prices had risen nearly 3% last week after Yemeni Houthi rebels led attacks on ships and disrupted global trade. The rebels have said they’re attacking companies they see as supporting Israel’s war efforts, even if companies have stated they aren’t affiliated with the conflict.
Shipping companies have largely stopped sending ships through the region and have levied further fees for rerouting the ships. However, major shipping company Maersk is planning on resuming shipping operations in the Red Sea and the Gulf of Aden, citing protection from a coalition of countries, led by the U.S. military, designed to protect commerce in the area after the attacks.
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“With the [Operation Prosperity Guardian] initiative in operation, we are preparing to allow for vessels to resume transit through the Red Sea both eastbound and westbound,” Maersk said in a statement on Sunday.
Oil is also making gains after signals from the Federal Reserve of cutting interest rates at least three times in 2024. Lowering interest rates will cut consumer borrowing cuts and boost the economy — and therefore, oil demand.
