By Georgina McCartney

HOUSTON (Reuters) -Oil prices fell on Thursday with Yemen’s Houthi militia expected to halt attacks on ships in the Red Sea, and investors weighed strong U.S. retail data.

Brent crude futures were down $1.06, or 1.29%, to $80.97 per barrel as at 12:14 p.m. EST, after rising 2.6% in the previous session to their highest since July 26.

U.S. West Texas Intermediate crude futures were down $1.50, or 1.87%, to $78.54 a barrel, after gaining 3.3% on Wednesday to their highest since July 19.

U.S. crude futures fell more than $2 during session.

Maritime security officials said on Thursday they were expecting the Houthi militia to announce a halt in attacks on ships in the Red Sea, after a ceasefire deal in the war in Gaza between Israel and the militant group Hamas.

The attacks have disrupted global shipping, forcing firms to reroute to longer and more expensive journeys around southern Africa for more than a year.

“The Houthi development and the ceasefire in Gaza helps the region stay calmer, taking some of the security premium out of oil prices,” said John Kilduff, partner at Again Capital in New York.

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

Elsewhere, U.S. retail sales increased in December as households bought motor vehicles and a range of other goods, pointing to strong demand in the economy.

U.S. crude futures extended losses after investors interpreted the data as bolstering the Federal Reserve’s cautious approach to cutting interest rates this year.

But prices recouped some losses following comments from Federal Reserve Governor Christopher Waller, that inflation is likely to continue to ease and possibly allow the U.S. central bank to cut interest rates sooner and faster than expected.

“Waller’s comments really offset the economic data this morning, in terms of making it look like there is room for the Fed to cut,” said Again Capital’s Kilduff.

Lower interest rates can stimulate economic growth and increase oil demand.

Investors also continued to weigh the Biden administration’s latest round of sanctions targeting Russia’s military industrial base and evasion schemes, after earlier levying broader sanctions on Russian oil producers and tankers. Moscow’s top customers are now scouring the globe for replacement barrels, while shipping rates have surged too.

With Donald Trump being sworn in for his second term on Monday, “the market is approaching the ‘wait-and-see’ phase and awaits the reaction from the incoming U.S. administration on the issue” of sanctions, said Tamas Varga at oil broker PVM.

Pricier oil may also lead to clashes between Trump and the Organization of the Petroleum Exporting Countries, if the incoming president follows his previous playbook.

During his first term, Trump demanded the producer group rein in prices whenever Brent climbed to around $80 a barrel.

OPEC and its allies, collectively OPEC+, have been curtailing output over the past two years and are likely to be cautious about increasing supply despite the recent price rally, said Commodity Context founder Rory Johnston.

“The producer group has had its optimism dashed so frequently over the past year that it is likely to err on the side of caution before beginning the cut-easing process,” Johnston said.

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

The analysts expect oil demand to grow by 1.4 million bpd year on year in coming weeks, driven by heightened travel activities in India, where a huge festival is taking place, as well as by travel for Lunar New Year celebrations in China at the end of January.

(Reporting by Georgina McCartney in Houston, Paul Carsten in London, Siyi Liu in Singapore and Shariq Khan in New York; Editing by Elaine Hardcastle, Emelia Sithole-Matarise and David Evans)

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