Oil prices rise as U.S. production forecast to flatline this year

Environment

A Palestinian petrol station attendant stands at empty pumps at a closed petrol station in Rafah in the southern Gaza Strip on November 5, 2023, amid the ongoing battles between Israel and the Palestinian group Hamas.
Said Khatib | AFP | Getty Images

Oil prices rose Tuesday as investors weighed efforts to negotiate a truce in Gaza against a U.S. vow to take further action against militants in the Middle East.

The West Texas Intermediate contract for March added 52 cents, or 0.71%, to $73.30 a barrel. The Brent contract for April was trading at $78.58 a barrel, up 57 cents or, 0.73%.

Secretary of State Antony Blinken is visiting Egypt Tuesday after meeting with the Saudi crown prince on Monday. Blinken is consulting with allies in the region in an effort to secure a truce in Gaza and prevent the war from spilling over in to a broader regional conflict.

Blinken’s trip to the region comes after the U.S. again launched airstrikes against Iranian forces and allied militants in Iraq, Syria and Yemen over the weekend. The strikes came in response to the deaths of three U.S. troops in a drone attack in Jordan carried out by Iran-allied militants.

White House National Security Advisor Jake Sullivan said Sunday that the U.S. will take additional, “further action” after the latest weekend strikes.

Tamas Varga, an analyst with oil broker PVM, said geopolitical tensions are keeping a floor under oil prices as expectations for rapid interest rate cuts in the U.S. diminish and the strength of China’s economy remains a concern.

“The false prophecy of ostensible truce between Israel and Hamas has been followed by intense U.S. and UK strikes against Iranian-backed militant groups in Iraq and Syria and by attacks on Houthi groups in Yemen,” Varga wrote in a Tuesday note.

“The heightened tension will undoubtedly entail renewed Houthi hostilities in the Red Sea ensuring persistent re-routing of oil traffic around the Cape of Good Hope,” Varga wrote.

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