US Crude Prices Climb $2 Due To Middle East Concerns.

Brent crude prices surged by $1.17, marking a 1.51% increase, reaching $78.76 a barrel. Meanwhile, West Texas Intermediate crude futures rose by $1.62, a 2.26% increase, reaching $73.82 by 10:42 CST (1642 GMT)

US crude futures rose more than $2 on January 5 as US Secretary of State Antony Blinken prepared to visit the Middle East in an effort to defuse rising regional tensions as the Israel-Hamas conflict rages.
Brent crude prices rose $1.17, or 1.51%, to $78.76 a barrel, while S West Texas Intermediate crude futures rose $1.62, or 2.26%, to $73.82 by 10:42 CST (1642 GMT).
Both benchmarks are expected to close the first week of the year higher, recovering from losses on January 4 caused by large rises in US petrol and distillate supplies.
The price rise serves as “a reminder of the risk that is rooted in ever-growing tension in the Middle East,” according to PVM analyst Tamas Varga.

Expectations were tempered by a US government data showing that employment increased in December, which may constrain interest rate cuts in the next year, as well as a significant bank note on oil stocks.

In December, US employers exceeded expectations by hiring more workers and increasing wages substantially, causing financial markets to reconsider the likelihood of the Federal Reserve initiating interest rate cuts in March.

According to the Labor Department’s Bureau of Labor Statistics, nonfarm payrolls surged by 216,000 jobs last month, surpassing the forecasted rise of 170,000 jobs by economists surveyed by Reuters. The economy witnessed a notable slowdown in job creation, adding 2.7 million jobs in 2023 compared to the 4.8 million positions generated in 2022.

Jeffrey Roach, the chief economist at LPL Financial in Charlotte, North Carolina, stated, “This report reduces the likelihood of a Fed cut in March and reinforces our belief that the Fed won’t commence cuts as early as the markets anticipate.”

The recent Federal Reserve meeting on January 4 indicated a growing confidence in managing inflation while expressing concerns about the potential negative impact of an “excessively restrictive” monetary policy on the economy.

In a January 5 research note, Bank of America adopted a defensive position towards oil stocks due to the long-term oil price forecast. They anticipate a continued trading range of $70 to $90 per barrel for Brent, but caution about the risk of a perpetually backward oil curve that could hinder sector value, influenced by spare capacity.

Following the release of Bank of America’s note, benchmark prices experienced a decline from previous highs. The bank further adjusted its outlook, stating, “Our 2024 base case projects $80 Brent, yet acknowledging perpetual backwardation as a new normal, our long-term price deck for the next two years drops to $75 Brent / $70 WTI from 2026.”

Maersk made an announcement to reroute all vessels away from the Red Sea for an unspecified duration, forewarning customers about potential disruptions.

Amid concerns about the escalating conflict, the State Department disclosed that Secretary of State Blinken was scheduled to embark on a week-long diplomatic trip to the Middle East to address the persisting threat of the conflict expanding.