Oil Posts Big Post-Christmas Rise But Still On Course For Yearly Loss

Meanwhile, Red Sea shipping concerns may be abating: File Image/Pixabay

More Houthi missile attacks on vessels in the Red Sea on Tuesday combined with Israel reiterating its vow to wipe out Hamas extended worries in the investment community as well as oil price gains, this time by over 2 percent.

Brent settled up $2, or 2.5 percent, at $81.07 per barrel, and West Texas Intermediate settled up $2.01, or 2.7 percent, to $75.57.

Oil was also said to be supported by continued expectations that the U.S. Federal Reserve will begin cutting interest rates in the new year, which in turn could boost economic growth and demand; impetus for the cuts stemmed from data showing that by some measures, inflation was now hovering at or below the Fed's 2 percent goal.

Iran-backed Houthi militia claimed responsibility for a missile attack on a container ship in the Red Sea as well as for an attempt to attack Israel with drones; meanwhile, signs the Israel/Hamas conflict is spreading took the form of the Islamic republic vowing revenge for an Israeli airstrike killing a senior leader of Iran's Revolutionary Guards.

Still, despite Tuesday's gains, the Red Sea worries seem to be abating: Maersk announced the resumption of shipping routes through those waters under the protection of a U.S. task force, while France's CMA CGM increased the number of vessels travelling through the Suez Canal.

Also on Tuesday, Bloomberg noted that Brent's prompt spread "has swung to 22 cents a barrel in backwardation, a bullish near-term pricing pattern, versus 16 cents a barrel in the opposite contango structure a week ago"; this has helped mitigate the commodity's annual decline, now on course for a 6 percent loss for 2023.

The news agency also stated, "The week between the Christmas and New Year holidays is likely to see lackluster liquidity, with combined aggregate open interest across the main oil contracts tracking lower since about the middle of this month."