Oil Prices Fall as Yemen’s Houthi Militia Expected to Halt Attacks on Ships in Red Sea
Oil prices settled lower on Thursday, despite strong U.S. retail sales data, as investors weighed the potential halt in attacks on ships in the Red Sea by Yemen’s Houthi militia. Oil futures closed 0.9% lower at $81.29 per barrel, after surging 2.6% on Wednesday to their highest price since July 26.
Maritime security officials expect the Houthi militia to announce a ceasefire deal with the Yemeni government and halt its attacks on ships in the Red Sea, following a ceasefire agreement in the Gaza Strip between Israel and the Palestinian militant group Hamas. The attacks have disrupted global shipping, forcing firms to take longer and more expensive routes around southern Africa for over a year.
Despite this, investors remained cautious, as the leader of the Houthis said his group would monitor the implementation of the ceasefire deal and continue its attacks on vessels or Israel if the deal is breached.
The strong U.S. retail sales data, which showed households buying more motor vehicles and other goods, also had a mixed impact on oil prices. The data was seen as bolstering the Federal Reserve’s cautious approach to cutting interest rates this year, but Fed Governor Christopher Waller’s comments on inflation potentially allowing for earlier and faster rate cuts offset the data’s impact.
Lower interest rates can stimulate economic growth and increase oil demand, but investors also remain concerned about the potential for higher oil prices, which could lead to clashes between the incoming U.S. administration and OPEC+, the oil-producing group.
OPEC and its allies have been curtailing output over the past two years and are likely to be cautious about increasing supply despite the recent price rally, according to Rory Johnston, the founder of Commodity Context. The group has had its optimism dashed frequently over the past year and is likely to err on the side of caution before beginning the cut-easing process.