Oil up with escalating Red Sea tension, weak US dollar

By Zeynep Beyza Kilic

Oil prices increased on Wednesday amid the ongoing conflict in the Red Sea, fueling concerns about possible supply disruptions.

The international benchmark crude Brent traded at $82.98 per barrel at 10.51 a.m. local time (0751 GMT), a 0.25% increase from the closing price of $82.77 a barrel in the previous trading session on Tuesday.

The American benchmark, West Texas Intermediate (WTI), traded at the same time at $78.03 per barrel, up 0.21% from Tuesday's close of $77.87 per barrel.

On Tuesday, Iran-backed Houthis in Yemen announced that US and UK warplanes targeted the Hudaydah province in the west of the country. Tuesday's airstrikes came a day after Houthis claimed an attack on a US ship in the Red Sea.

Concern that the conflict in the Middle East, where most of the world's oil resources are located, may spread to other regions aided price upticks.

In addition, the decline of the US dollar against other currencies also aided oil price rises.

The US dollar index, which measures the US dollar's value against other currencies, decreased by 0.14% to 104.707 at 10.50 a.m. local time (0750 GMT) compared to Tuesday's closing price. The weak dollar is expected to raise demand by making oil cheaper for foreign currency holders.

However, a larger-than-expected crude oil stock buildup signaled a drop in demand in the US, the world's largest oil consumer, to limit price rises in both benchmarks.

Crude inventories increased by 8.52 million barrels last week, according to the American Petroleum Institute's latest data released late Tuesday, relative to the market expectation of an increase of 2.6 million barrels.

Furthermore, US inflation figures came in above expectations, fueling concerns about a delay in the Federal Reserve's first interest rate cut this year.

Annual consumer inflation in the US came in at 3.1% in January, higher than estimates of 2.9%. Similarly, the Consumer Price Index exceeded expectations of a gain of 0.2%, rising 0.3% in January compared to the previous month.