Oil Prices flat amid geopolitical tensions, optimism over potential fed rate cuts

Global oil prices were trading on a flat note on Tuesday as investors remained focused on geopolitical tensions in the Middle East and anticipated interest rate cuts by the US Federal Reserve, signaling potential support for global economic growth and fuel demand.

Brent crude futures witnessed a slight dip of 26 cents, or 0.3 per cent, settling at $79.13 a barrel. Meanwhile, US West Texas Intermediate crude held steady at $73.59 a barrel, marking a marginal increase of 3 cents.

Trade remained thin on Tuesday due to the Boxing Day public holiday, leading to limited market activity.

Last week, both benchmarks recorded approximately 3 per cent gains following Houthi attacks on ships that disrupted global shipping and trade, contributing to heightened tensions in the Middle East amid the ongoing Israel-Gaza conflict.

Denmark's Maersk announced on Sunday its preparations to resume shipping operations in the Red Sea and the Gulf of Aden, citing the deployment of a US-led military operation aimed at ensuring the safety of commerce in the region. Shipping firms had earlier suspended vessel passages through the Red Sea, which connects with the Suez Canal—a crucial waterway handling about 12 per cent of global trade.

In a separate development, Iran refuted a US claim that a drone launched from Iran had struck a chemical tanker in the Indian Ocean. The Pentagon had reported over the weekend that the Chem Pluto ship, flying the Liberia flag and operated by a Dutch company, was hit 200 nautical miles off the coast of India.

Oil prices also found support in expectations of potential interest rate cuts by the Federal Reserve in the coming year. US data released on Friday indicated that, by some key measures, inflation was at or below the central bank's 2 per cent target. Lower interest rates typically reduce consumer borrowing costs, potentially boosting economic growth and fueling demand for oil.

(With Reuters inputs)