Oil surges amid concerns over supply surplus

Shafaq News / Oil prices ticked up on Tuesday as investors played cautious ahead of key interest rate decisions and inflation data releases, but concerns over supply surplus and slower demand growth kept a lid on gains.

Brent crude futures for February were up 26 cents, or 0.3%, to $76.29 a barrel as of 0342 GMT, while U.S. West Texas Intermediate crude futures for January delivery gained also gained 26 cents, or 0.4%, at $71.58 a barrel.

"All attention will be on the US CPI data today to potentially set the tone for US policymakers at their upcoming meeting," said Yeap Jun Rong, market analyst at IG, in a note.

The U.S. Consumer Price Index (CPI) report is due on Tuesday, while the Federal Open Markets Committee's (FOMC) two-day monetary policy meeting will end on Wednesday.

The U.S. Federal Reserve is widely expected to hold rates steady on Wednesday, but the November Fed minutes showed that policymakers were still concerned that inflation could be stubborn, leaving the door open for additional tightening if needed.

"Further inflation progress will be on watch to validate the effectiveness of current restrictive policies in place and give more room for the Federal Reserve (Fed) to consider rate cuts in 2024 if economic conditions worsen," said Yeap.

Also providing a lift to oil prices, a cruise missile launched from Houthi-controlled Yemen struck a commercial chemical tanker, causing a fire and damage but no casualties, two U.S. defence officials told Reuters on Monday.

The strike is one of the latest attacks by the Iran-aligned Houthis against ships in the Red Sea, escalating geopolitical tension in the region and heightening safety risks for tankers in vital shipping lanes.

Meanwhile, oil investors remain sceptical that total supply will drop after the OPEC+ group pledged to cut 2.2 million barrels per day (bpd) for the first quarter of 2024, as output growth in non-OPEC countries is expected to lead to excess supply next year.

(Reuters)