By Scott DiSavino
NEW YORK (Reuters) -Oil prices were up about 1% on Thursday Iran seized an oil tanker off the coast of Oman, raising the prospect of escalating conflict in the Middle East.
Brent futures rose 43 cents, or 0.6%, to $77.23 a barrel by 1:55 p.m. EST (1855 GMT), while U.S. West Texas Intermediate (WTI) crude rose 47 cents, or 0.7%, to $71.84.
Earlier in the session, both benchmarks were up over $2 a barrel but have pulled back on an unexpected increase in U.S. inflation and reports that China was seeking less Saudi imports.
Iran seized a tanker with Iraqi crude destined for Turkey in retaliation for the confiscation last year of the same vessel and its oil by the U.S.
The seizure of the Marshall Islands-flagged St Nikolas coincides with weeks of attacks by Yemen’s Iran-backed Houthi militias targeting Red Sea shipping routes.
Yemen-based Houthis this week mounted their largest attack yet on commercial shipping lanes in the Red Sea.
The U.S. and Britain hinted they would take further measures if the attacks continued. The U.N. Security Council passed a resolution demanding an immediate end to the Houthi strikes.
The group’s leader, Abdel-Malek al-Houthi, said any attack on the Houthis would not go without a response, noting any such response would be bigger than the recent strike in which its drones and missiles targeted a U.S. ship in the Red Sea.
Israel, meanwhile, faced down accusations at the World Court of genocide in its war in Gaza, as the first residents returned to scenes of total devastation in the north of the enclave where Israeli forces began withdrawing this week.
Global trade declined by 1.3% from November to December 2023 as militant attacks on merchant vessels in the Red Sea led to a plunge in the volumes of cargo transported in the region.
“Slowing demand, unrest in Middle East and muted price reaction have producers, consumers and market participants alike feeling paranoid about oil prices,” Barclays said on Thursday as the bank lowered its 2024 Brent forecast by $8 to $85 a barrel.
BEARISH FACTORS WEIGHING ON CRUDE
Oil prices were up even though U.S. data showed consumer inflation rose 3.4% in December on a yearly basis versus a 3.2% increase expected by economists polled by Reuters. On a monthly basis, it rose 0.3% versus the anticipated 0.2% increase.
The higher-than-expected rise in inflation could delay a much anticipated interest rate cut in March from the U.S. Federal Reserve.
“Given that markets have continued to price in rate cuts in March, a delay of the currently anticipated timeline would dampen investor sentiment, likely bringing (crude) price declines with it,” analysts at energy consulting firm Gelber and Associates said, noting stock indices were down.
Lower interest rates would reduce consumer borrowing costs, which could boost economic growth and demand for oil.
Refiners in China, the world’s top oil importer, asked for less Saudi crude oil in February even though Saudi Arabia, the world’s top oil exporter, announced its biggest price cut in 13 months.
Looking ahead, China’s customs administration will release December trade data on Friday, giving a full-year picture of overall demand.
In other news, China and Taiwan’s largest opposition party, the Kuomintang, warned of the danger Taiwan’s ruling party presidential candidate Lai Ching-te could pose to peace if he wins this weekend’s election.
(Reporting by Scott DiSavino in New York, Ahmad Ghaddar in London, Colleen Howe in Beijing and Jeslyn Lerh in Singapore; Editing by Nick Macfie and Nick Zieminski)
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