Oil Prices Start the Week With a Gain After U.S. Strikes on Yemen

Crude oil prices started the week with a jump following U.S. attacks on the Yemeni Houthis, with the Department of Defense stating the attacks will continue until the Houthis stop attacking ships traversing the Red Sea.

At the time of writing, Brent crude was trading at $71.10 per barrel, with West Texas Intermediate at $67.70 per barrel, both up on opening and likely to go higher later in the day, barring bearish news such as the Houthis agreeing to stop bombing ships in the Red Sea.

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The attacks on ships have cost the maritime transport industry additional expenses for the longer route from Asia to Europe, which goes around Africa and adds weeks to the journey. The Houthis’ offensive has also added to fuel demand from the industry.

“We’ve got a reemergence of those geopolitical tensions,” IG analyst Tony Sycamore told Reuters. “If crude oil gets much above $68.50, I think that could really start to trigger some short covering in the market.”

Economic data from China, meanwhile, gave mixed signals for the world’s top importer of crude. On the one hand, industrial production slowed down over the first two months of the year. On the other, retail sales moved higher. In additional news that may let weight to the bullish view, Chinese refinery throughput over the first two months of the year inched 2.1% higher than a year ago, driven by holiday travel demand and the start of a new refinery late last year, which added 200,000 bpd to overall demand from refiners and will this month add another 200,000 barrels.

ING commodity analysts noted that China’s property market was showing further signs of stabilization, although the completion of this process would take a while yet. The property market has been a major headache for Chinese economic planners and a factor contributing to bearish sentiment on oil markets.

By Irina Slav for Oilprice.com

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