Investing.com -- Oil prices climbed strongly Tuesday, rebounding after sliding during the previous session as traders digested continued supply disruptions through the Red Sea (NYSE:SE).
By 08:45 ET (13.45 GMT), the U.S. crude futures traded 2.7% higher at $72.67 a barrel and the Brent contract climbed 2.4% to $77.98 a barrel.
Shippers continue to avoid Red Sea region
The conflict between Israel and Hamas looks set to continue for some time, and this remains a support to prices amid fears it will grow into a regional crisis that could disrupt supplies from this oil-rich region.
A number of major shipping firms are still avoiding the Red Sea, adding a premium to the cost of exporting crude.
Hapag-Lloyd will continue to divert vessels around the Cape of Good Hope in the wake of maritime attacks by Yemeni Houthi militants, it said on Tuesday.
Maersk, the world's second-largest shipper, said on Friday that it would divert its vessels away from the Red Sea region for the "foreseeable future."
OPEC+ now in a difficult position
The crude market had slumped around 3% on Monday following sharp cuts by top exporter Saudi Arabia to its official selling prices, raising demand concerns, especially from the crucial Asian market.
The cuts to Saudi OSPs come about a month after new output reductions from the Organization of Petroleum Exporting Countries and allies for 2024 largely underwhelmed markets.
“If weakness persists, it is difficult to see how OPEC+ would be able to make more meaningful output reductions, given the scale of their cuts already,” said analysts at ING, in a note.
“What we are more likely to see is a rollover of current voluntary cuts into 2Q24 to erode the surplus expected next quarter.”
Markets await more inflation, U.S. production cues
Oil markets were also on edge before key economic readings due this week. U.S. inflation data is due on Thursday and is widely expected to factor into the path of interest rates, while Chinese inflation and trade data due Friday is expected to offer more cues on the world’s largest oil importer.
Ahead of this comes the latest reading of U.S. crude inventories from industry body American Petroleum Institute later in the session, with the official data from the Energy Information Administration on Wednesday.
The EIA will also release its Short-Term Energy Outlook later Tuesday, which will include its latest U.S. oil production forecasts for 2024 and its first forecast for 2025. Last month, the EIA expected U.S. crude oil output to grow by 190,000 barrels a day in 2024 to a record 13.11 million barrels a day.
(Ambar Warrick contributed to this article.)