Oil prices increased by in the first session of the New Year, driven by potential supply disruptions in the Middle East following a naval clash in the Red Sea and hopes of strong holiday demand and economic stimulus in China, Reuters reports.
Brent crude rose by 1.5% to $78.24 a barrel, while U.S. West Texas Intermediate crude reached $72.66 a barrel, up 1.4%.
The naval clash involved an attack by Houthi militants on a Maersk container vessel, leading to concerns about escalating regional tensions. U.S. helicopters repelled the attack.
Additionally, expectations of increased Chinese demand during the Spring Festival holiday and the possibility of economic stimulus measures added support to oil prices.
“The oil price may be affected by the escalation of the situation in the Red Sea over the weekend and the peak demand season during China’s Spring Festival,” Leon Li, a Shanghai-based CMC Markets analyst said, referring to the Lunar New Year holiday set for early February.
Li added that the forecast Chinese holiday demand was also raising expectations for a price rebound in January.
A Reuters survey of economists and analysts predicted Brent crude would average $82.56 a barrel this year, slightly higher than the average of $82.17 in 2023. Analysts forecast that weak global growth would cap demand, but expected geopolitical tensions to provide support.