Oil swung in a narrow range as expectations for swelling global supplies ease the effects of escalating tensions in the Middle East.

The U.S. has launched multiple attacks on Houthi targets in Yemen as the Iranian-backed group continues to menace shipping off the coast, firing at another vessel. Still, the International Energy Agency expects an amply supplied market this year, and U.S. data released Thursday showed an unexpected gain in the country’s crude stockpiles.

Concerns about the strength of China’s economy are adding to the fundamental pessimism in a market that has relied on geopolitical developments to eke out gains, said Rebecca Babin, a senior energy trader at CIBC Private Wealth. West Texas Intermediate gained as much as 1.1 per cent early in the session on the Red Sea turmoil before sliding 0.7 per cent to trade below US$74 a barrel.

“Geopolitical headlines are the oxygen keeping a bid in crude,” Babin said. “It can only stay higher for so long without a new one.”

Futures have struggled for direction in 2024 and frequently followed broader financial market sentiment. Participation in crude markets from fundamental players has been limited, said Daniel Ghali, a commodity strategist at TD Securities.

“Flows from trend-following algorithms are now overwhelmingly driving” oil trading, he said.

Despite the front-month price’s lack of momentum, parts of the oil complex are signaling a tight market. WTI’s prompt spread, a critical barometer for supply and demand, surged into a bullish backwardated structure earlier this week, indicating supply is outstripping consumption.

Prices:

• WTI for February delivery fell 0.7 per cent to $73.58 a barrel at 12:28 p.m. in New York.
• Brent for March settlement dropped 0.5 per cent to $78.69 a barrel.