Oil pared gains as broad risk-off sentiment undercut concerns about escalating conflict in the Red Sea.

West Texas Intermediate edged lower to trade below US$71 a barrel, following a retreat in equity markets. Volumes have remained thin after the holiday season, leading to exacerbated price movements.

Crude rallied earlier after Iran deployed a warship to the Red Sea, the latest flashpoint in the Middle East conflict. Attacks on merchant shipping in the key transit corridor have led to the re-routing of everything from container ships to gas carriers.

“The move by Iran of moving the battleship into the Red Sea is more bark than bite, but it will keep crude in a nervous trade,” said Dennis Kissler, senior vice president at BOK Financial.

Markets also are keeping an eye on China, the world’s largest oil buyer, and its increased crude import quota. Private refiners and traders received an allocation for crude purchasing that almost matched the one they received for the entirety of last year, potentially boosting the outlook for the country’s consumption.

The latest cuts from the Organization of Petroleum Exporting Countries and its allies will take effect this quarter, and could then be extended further. Traders genehave rally been wary of the Nov. 30 pledge from OPEC+ to slash production further, remaining skeptical of its implementation.

Prices:

• WTI for February delivery fell 0.768 per cent to $71.10 a barrel at 9:50 a.m.a.m. in New York.
• Brent for March settlement rose 0.9 per cent per cent to $76.36 a barrel.