According to Reuters, oil fell $1 on expectations of an end to Houthi ship attacks

By Georgina McCartney

HOUSTON (Reuters) – Investors weighed heavily on U.S. retail data as oil prices fell on Thursday as Yemen’s Houthi militias were expected to end attacks on Red Sea shipping.

Futures were down $1.06, or 1.29 percent, at $80.97 a barrel in the previous session, after hitting their highest level since July 26.

U.S. West Texas Intermediate crude futures were down $1.50, or 1.87%, at $78.54 a barrel. Having gained 3.3% since July 19th.

Futures fell more than $2 during the session.

Maritime security officials said on Thursday that Houthi militias would end attacks on Red Sea vessels after a ceasefire agreement was reached in the Gaza war between Israel and the militant group Hamas.

The attacks have disrupted global shipping, forcing companies to switch to longer and more expensive voyages around southern Africa for more than a year.

“The development of the Houthis and the cease-fire in Gaza will help stabilize the region, taking some of the security premium off oil prices,” said John Kilduff, a partner at Again Capital in New York.

“It’s all about oil flows,” Kilduff added.

Elsewhere, U.S. retail sales rose in December as households bought motor vehicles and miscellaneous goods, reflecting strong demand in the economy.

U.S. crude futures extended losses after investors interpreted the data as a sign that the Federal Reserve is stepping up its cautious approach to cutting interest rates this year.

But prices recovered some losses following comments from Federal Reserve Governor Christopher Waller that inflation is easing and the US central bank may cut interest rates sooner than expected.

ReCapital’s Kilduff said: “Waller’s comments will spoil the economic data this morning in terms of suggesting the Fed has room to cut.”

Low interest rates can stimulate economic growth and increase demand for oil.

Investors continue to weigh the latest sanctions by the Biden administration, which target Russia’s military industrial base and smuggling programs, after earlier imposing broader sanctions on Russian oil producers and tankers. Moscow’s top customers are now traveling the world to find replacement barrels, and shipping costs have risen.

As Donald Trump is sworn in for a second term on Monday, “the market is approaching a ‘wait-and-see’ phase and is awaiting the reaction to the upcoming US administration sanctions,” said Tamas Varga at oil brokerage PVM. .

If the incoming president follows his previous playbook, high oil prices could lead to a conflict between Trump and the Organization of the Petroleum Exporting Countries.

During his first term in office, Trump asked the producer group to buy prices every time Brent rose to $80 a barrel.

OPEC and its allies as a whole, OPEC+, have been cutting production over the past two years and need to be cautious about supply despite the recent rally in prices, said Rory Johnston, founder of Production Context.

“The production team has lost hope so often over the past year that they can err on the side of caution before starting the cutting process,” Johnston said.

On the demand front, global oil output fell by 1.2 million barrels per day (bpd) in the first two weeks of 2025, slightly below expectations for the same period a year ago, JPMorgan analysts wrote in a note.

Analysts expect oil demand to grow by 1.4 million bpd in the coming weeks, driven by increased travel activity in India, where a major festival is underway, as well as visits to China for the Lunar New Year holidays in late January.