Oil prices nudge up amid Middle East tensions

March 12, 2024 (MLN): Oil prices edged higher in Tuesday’s trading session amid escalating geopolitical tensions in the Middle East, fueling supply concerns.

Brent crude traded near $82.5 per barrel, up by 0.35% on the day.

While West Texas Intermediate crude (WTI) was at $78.13 per barrel, up by 0.26% on the day.

While the war between Israel and Palestinian group Hamas has not led to significant oil supply disruptions, Yemen's Iran-aligned Houthis have been attacking ships in the Red Sea and Gulf of Aden since November in what they say is a campaign of solidarity with Palestinians, as Reuters reported.

Airstrikes attributed to a U.S.-British coalition hit port cities and small towns in western Yemen on Monday, while the Houthis said on Tuesday they had targeted what was described as the "U.S. ship Pinocchio" in the Red Sea with missiles.

Capping gains however are the outlooks for weaker demand and increasing supply from producers outside of the Organization of Petroleum Exporting Countries (OPEC).

"Bearish demand sentiments and growing non-OPEC supply leave little room for the market to be bullish on oil prices at this time," said Serena Huang, head of APAC analysis at Vortexa.

The International Energy Agency (IEA) expects oil supply to grow to a record high of about 103.8 million bpd, almost entirely driven by producers outside OPEC and its allies (OPEC+), including the United States, Brazil and Guyana.

Meanwhile, China's crude oil imports rose in the first two months of the year versus the same period in 2023, but they were weaker than the preceding months, continuing a trend of softening purchases by the world's biggest buyer.

In the meantime, the market is awaiting demand estimates from monthly reports by OPEC, the IEA and the Energy Information Administration, analysts from ANZ said in a note.

"While we believe the estimates will be largely unchanged, any upside surprise will ease demand concerns."

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