Oil was marginally down on Tuesday as investors weighed dented hopes of a Russia-Ukraine peace deal and rising geopolitical tensions in the Middle East around Yemen.
Brent crude futures declined by 2 cents or 0.03 per cent to $61.92 per barrel and the US West Texas Intermediate (WTI) crude futures tumbled by 13 cents or 0.22 per cent to $57.95 a barrel.
The market focused largely on the latest flare-up between Saudi Arabia and the United Arab Emirates over Yemen after strikes by a Saudi Arabia-led coalition on what it described as foreign military support to UAE-backed southern separatists in Yemen.
Saudi Arabia, a member of the Organisation of the Petroleum Exporting Countries (OPEC), said on Tuesday that its national security was a red line and backed a call for UAE forces to leave Yemen within 24 hours, shortly after a Saudi-led coalition carried out the airstrike on the southern Yemeni port of Mukalla.
The UAE’s Defence Ministry said later that it has voluntarily ended the mission of its counterterrorism units in Yemen, the only remaining forces it has in the country after ending its military presence in 2019.
Yet for oil markets, the immediate impact is close to zero despite Saudi Arabia and the UAE sit at the core of OPEC’s decision-making.
In other Middle East developments, US President Donald Trump said that the US could support another major strike on Iran were the country to resume rebuilding its ballistic missile or nuclear weapons programmes.
On the Russia-Ukraine front, The Russian government accused Ukraine of targeting a Russian presidential residence, denting hopes of a peace deal.
The ongoing US blockade of Venezuelan oil and suspension of Caspian CPC Blend exports because of poor weather supported prices on Tuesday.
Market analysts also noted that despite renewed fears of potential supply disruptions, perceptions of an oversupplied global market remain and could cap prices.
The American Petroleum Institute (API) estimated that crude oil inventories in the US saw a build of 1.7 million barrels in the week ending December 26. Crude oil inventories rose by 2.4 million barrels in the week prior.
Gasoline (petrol) inventories saw another increase this week, gaining 6.2 million barrels in the week ending December 26 and distillate inventories also rose in the reporting period, gaining 1 million barrels, after gaining 700,000 barrels in the week prior.
The official data from the US Energy Information Administration (EIA) will be released later on Wednesday, as last week’s data remain missing.