LONDON, March 17: Crude oil prices edged higher on Monday following U.S. military action against Yemen’s Houthi rebels and renewed optimism about China’s economic recovery, which could bolster global energy demand.
Over the weekend, U.S. President Donald Trump authorized airstrikes targeting the Iran-aligned Houthis in response to their continued attacks on Red Sea shipping. A U.S. official indicated that the military campaign could extend for several weeks.
As of 10:17 GMT, Brent crude futures increased by 63 cents (0.9%) to reach $71.21 per barrel, while U.S. West Texas Intermediate (WTI) crude futures climbed 62 cents (0.9%) to $67.80 per barrel.
Chinese Economic Signals Boost Market Sentiment
Positive economic data from China further supported oil prices. Retail sales growth accelerated during the January-February period, offering hope for stronger domestic consumption. However, challenges remain as unemployment rose and industrial output weakened.
“Oil prices are responding positively to stronger-than-expected Chinese economic indicators, potential additional stimulus measures, and escalating geopolitical tensions,” noted UBS analyst Giovanni Staunovo. “So far, there are no actual supply disruptions, but market sentiment remains sensitive.”
Market Dynamics and Supply Considerations
The oil market maintains a “relatively healthy physical balance,” according to Tamas Varga of PVM brokerage. He pointed to backwardation—a market condition where near-term oil contracts trade at a premium over later-dated contracts—as a sign of underlying demand strength.
“Market dips continue to present short-term buying opportunities, even as broader economic uncertainties persist,” Varga added.
Despite last week’s modest gains, Brent crude remains nearly 5% lower in 2024 due to global economic slowdown concerns, partly fueled by escalating trade tensions between the U.S. and other nations.
Additionally, OPEC+ has announced plans to raise oil production starting in April, exerting downward pressure on prices. However, the potential for stricter U.S. sanctions against Iran could counteract the effects of the supply increase, noted Saxo Bank analyst Ole Hansen.
“China’s efforts to stimulate consumption and growing Red Sea security risks are currently supporting the oil market,” Hansen added.
Meanwhile, diplomatic developments in Ukraine have also influenced oil prices. President Trump stated that he plans to hold discussions with Russian President Vladimir Putin on Tuesday regarding potential peace negotiations.
