Oil prices were little changed on Friday ahead of the long Christmas holiday weekend as worries that Houthi attacks on ships in the Red Sea were boosting supply costs offset expectations Angola could increase output after leaving OPEC.
In addition, economic data from the U.S. was mixed as reports that inflation declined faster than expected offset a drop in new single-family home sales.
Brent futures fell 11 cents, or 0.1%, to $79.28 a barrel by 11:56 a.m. EST (1656 GMT), while U.S. West Texas Intermediate (WTI) crude fell 3 cents to $73.86.
That left both benchmarks on track to climb about 3% for the week after gaining less than 1% last week.
In the Middle East, more maritime carriers said they were avoiding the Red Sea due to attacks on vessels carried out by the Iranian-backed Houthi militant group, which says it is responding to Israel’s war in Gaza.
Major shippers Maersk and CMA CGM said they would impose extra charges linked to re-routing ships.
The attacks have caused disruptions through the Suez Canal, which handles about 12% of world trade.
“Direct pauses to supply are not the only reason oil prices will be moved by the Red Sea situation; freight rates and insurance costs are increasing,” said PVM analyst John Evans about the impact of the disruption.
In Africa, meanwhile, Angola’s decision to leave the Organization of the Petroleum Exporting Countries (OPEC) could open the way for Beijing to increase investment in the country’s oil and other sectors. Angola produces about 1.1 million barrels per day of oil.
“It will take time for Angola oil production to rise even if China moves in there in a big way,” said Phil Flynn, an analyst at Price Futures Group, noting that the U.S. inflation data and Houthi attacks in the Red Sea should be more supportive of oil than any future increase in output from Angola.
U.S INFLATION EASES
In the U.S., a key inflation reading came in softer than expected, boosting investor optimism that the U.S. Federal Reserve (Fed) would lower borrowing costs next year.
Lower interest rates cut consumer borrowing costs, which can boost economic growth and demand for oil.
The U.S. personal consumption expenditures (PCE) price index, considered to be the Fed’s preferred inflation gauge, climbed 2.6% in November on an annual basis, compared with expectations for a 2.8% rise, according to economists polled by Reuters.
Expectations that the Fed was more likely to cut interest rates next year also helped reduce the U.S. dollar (.DXY) to its lowest since July against a basket of other currencies for a second day in a row.
A weaker dollar can boost oil demand by making the fuel more expensive for buyers using other currencies.
But all U.S. economic news was not positive.
Sales of new U.S. single-family homes dropped to a one-year low in November, but the unexpected decline is probably temporary amid a chronic shortage of previously owned homes, which has been supporting demand for new construction.
Source: Reuters (Reporting by Scott DiSavino in New York, Robert Harvey and Noah Browning in London and Emily Chow in Singapore; Editing by Miral Fahmy, Mark Potter, Louise Heavens and Jonathan Oatis)