Oil ticked higher as persistent tensions in the Middle East lifted prices that continue to trade in a narrow band so far this year.

Global benchmark Brent advanced above US$78 a barrel on Thursday. The U.K. Maritime Trade Operations said an oil tanker was boarded in the Gulf of Oman by men in military uniforms, while the U.S. and allies weighed options for retaliating against Yemen-based Houthi militants for attacks on Red Sea shipping.

“The more widespread the retaliation against the Houthis, the more likely the Houthis are to escalate their attacks against civilian ships in the Red Sea, against coalition warships and even potentially against targets in Yemen and the Gulf Cooperation Council,” said Ryan Bohl, a Middle East analyst at risk intelligence consultancy RANE Network, on Bloomberg Television.

Oil has struggled to find a clear direction so far this year, swinging between daily gains and losses, as traders attempt to gauge the outlook. Barclays cut its 2024 outlook for brent crude by $8 to $85 per barrel as inventories are higher than expected and OPEC+ will take longer than anticipated to normalize spare production capacity.

Additional support for crude — as well as other raw materials including copper — came from a weaker U.S. currency, which makes purchases cheaper for overseas buyers. Inflation data later Thursday will be scrutinized for clues on the pace at which inflation is easing, and the consequences for monetary policy, helping investors assess when the U.S. Federal Reserve may start cutting interest rates in 2024.

“It’s an uneven tug-of-war between a bearish global oil demand-supply outlook and a supportive, albeit fleeting, risk premium from the Red Sea attacks and tensions,” said Vandana Hari, founder of Vanda Insights. “Sentiment appears more predisposed to panicky selling than protective buying.”

Prices:

• Brent for March settlement was up 1.4 per cent at $77.90 a barrel at 10:36 a.m. in London.
• WTI for February delivery rose 1.5 per cent to $72.42 a barrel.