Thursday’s session concluded with the U.S. benchmark February West Texas Intermediate (WTI) crude oil futures settling lower this week in the crude oil market.
Despite this downturn, the market retained most of its gains for the week. The early part of the week was characterized by bullish trends, driven by several factors including Middle East tensions affecting supply routes and a weakening U.S. Dollar, which made dollar-denominated crude oil more attractive to foreign buyers.
Middle East Tensions Elevate Market Uncertainty
Escalating tensions in the Middle East notably influenced the crude oil market this week. The strategic Red Sea shipping lanes encountered increased risks following attacks by Yemen’s Iran-aligned Houthi militants. These incidents spurred a rise in oil prices, as traders braced for anticipated disruptions in maritime trade. Responding to these challenges, the U.S. government announced the formation of a task force to safeguard Red Sea commerce, underscoring efforts to protect this vital trade corridor. While these attacks have certainly raised the risk premium in the market, some analysts contend that, as of now, the actual impact on oil supply remains limited.
EIA’s Insightful Data: Bearish Implications
Data from the U.S. Energy Information Administration (EIA) revealed an unexpected increase in U.S. crude, gasoline, and distillate stocks last week, surpassing analysts’ expectations.