OIL FUTURES: Crude jumps as Middle East tensions escalate; soft US inflationary data fuels deeper rate cuts

Crude oil futures were higher in midmorning Asian trade Dec. 23, as the complex saw some near-term support following escalating Middle Eastern tensions, while a softer-than-expected US economic data reignited deeper rate cut hopes in 2025.

At 11:19 am Singapore time (0319 GMT), the ICE February Brent futures contract was up 27 cents/b (0.37%) from the previous close at $73.21/b, while the NYMEX February light sweet crude contract rose 32 cents/b (0.46%) to $69.78/b.

Global oil markets saw reignited geopolitical tensions after Israel's Prime Minister Benjamin Netanyahu vowed to retaliate against Yemen's Houthi rebels following a Houthi missile strike that injured more than a dozen people in Tel Aviv.

"As we acted with force against the terrorist arms of Iran's axis of evil, so we will act against the Houthis... with force, determination and sophistication," Netanyahu said Dec. 22.

Analysts said oil fundamentals remain bullish based on supply-and-demand dynamics, with near-term prices likely weighed by the spillover from concerns over the Federal Reserve's dot plot and China's oil demand.

"Oil is still stuck in a new higher trading range, but now is acting like it wants to hibernate until after the holidays," PRICE Futures Group's Senior Market Analyst Phil Flynn said late Dec. 20.

In economic news, the US Personal Consumption Expenditure Price Index -- the Fed's preferred inflation gauge -- inched up 0.1% to 2.4% in November, falling short of market expectations of 2.5%, the latest data from the Commerce Department showed late Dec. 20.

This comes after the Federal Reserve's projection on Dec. 18 that 2025 would likely to see only two quarter-point rate cuts, fewer than previously forecast, with Fed Chair Jerome Powell noting that while the central bank remains confident that price pressures would continue to ease, the Fed is beginning to analyze how President-elect Donald Trump's promises of higher tariffs would change the outlook.

"Markets are currently navigating through a thick fog of policy uncertainty beyond the Federal Reserve's maneuvers," SPI Asset Management's Managing Partner Stephen Innes said Dec. 21, adding that "the impact of tariffs on economic growth is unanimously expected to be detrimental".

Trump vows tariffs on EU unless it increases US oil and gas imports

Meanwhile, President-elect Donald Trump said Dec. 20 that he will impose tariffs on the EU if they do not buy more US oil and gas, the latest in a growing list of tariff threats that could impact global energy trade.

"I told the European Union that they must make up their tremendous deficit with the United States by the large-scale purchase of our oil and gas," Trump said in a post on Truth Social. "Otherwise, it is TARIFFS all the way!!!"

So far in December, Europe has imported 9.4 million b/d of crude. Of that, 4.4 million b/d was light sweet crude, of which the US supplied 1.8 million b/d.

US crude exports are currently below export capacity because of lower demand from Asia. US crude exports to Asia have averaged 800,000 b/d so far in December, down from a recent peak of 1.8 million b/d in March, according to data from S&P Global Commodities at Sea.

Dubai crude

Dubai crude swaps were higher and intermonth spreads were lower in midmorning trade in Asia Dec. 23 from the previous close.

The February Dubai swap was pegged at $72.40/b at 10 am Singapore time (0200 GMT), up 71 cents/b (0.99%) from the Dec. 20 Asian market close.

The January/February Dubai swap intermonth spread was pegged at 45 cents/b at 10 am, down 2 cents/b over the same period, and the February/March intermonth spread was pegged at 45 cents/b, up 1 cent/b.

The February Brent/Dubai EFS was pegged at 88 cents/b, stable over the same period.