Brent Rises Above $80 as Conflicts Raise Supply Risks
The oil market rallies as prices hold above $80 due to rising tension in the Middle East; raising concern about the supply level supported by the weak US dollar reduces pressures on energy costs.
Brent price by 0.12% to $80.16 per barrel from the closing price of $80.06 a barrel in the previous trading session on Monday. The American benchmark, West Texas Intermediate (WTI), traded at the same time at $74.85 per barrel, up 0.12% from Monday’s close of $74.76 per barrel.
The decline in the US dollar against other currencies aided the rise in oil prices by making oil cheaper for buyers trading in foreign currencies, according to separate analysts’ notes.
The US dollar index decreased by 0.28% to 102.834 from Monday’s closing price. The conflict in the oil-rich Middle East is putting supplies at risk and pushing prices higher.
The UK’s Ministry of Defense stated in a joint statement on Monday that US and British forces had struck several Houthi targets in Yemen as they continue to threaten commercial ships in the Red Sea.
The US and the UK announced that they hit eight Houthi targets in Yemen as part of air operations they carried out with the support of Australia, Bahrain, Canada and the Netherlands.
In a warning to the Houthi leadership, the countries said in a statement that ‘we will not hesitate to defend lives and the free flow of commerce in one of the world’s most critical waterways in the face of continued threats.’
Since mid-November, the Houthis have carried out over 30 attacks on commercial ships in the Red Sea. The Houthis said their attacks aim to pressure Israel to halt its deadly onslaught on the Gaza Strip, which has killed more than 25,295 people since Oct. 7.
Meanwhile, a supply drop in the US, the world’s largest oil consumer, aided price increases on Tuesday. Due to the cold weather in the US, there are concerns that refinery operations will be affected, resulting in a fall in oil production.
Oil production in North Dakota, one of the largest oil-producing states in the country, declined by half as temperatures dropped to minus 17 degrees Celsius.
Strong winter storms killed over 80 people in many US states, destroyed buildings and cut power. Authorities have warned of the possibility of another bout of snow and ice sweeping in for the weekend.
The heightened geopolitical tensions have continued to provide support to the oil market with the recent reports of more airstrikes by the US and UK against the Houthis in Yemen. NGX Crosses N52Trn as Dangote Cement Rallies
Meanwhile, drone strikes by Ukraine have shut down a Novatek PJSC gas-condensate terminal on the Baltic coast over the weekend, raising concerns for the oil exports from Russia’s western ports.
North Dakota’s pipeline authority estimates that oil production in the region was down around 250-300Mbbl/d as of 22 January due to the operational challenges amid the cold snap. The estimates have slightly improved from Friday’s estimate of being down around 350-400Mbbl/d as the weather has improved. The extreme cold weather in the US has also impacted refining operations in the country with around 15% of refining capacity in the Gulf Coast region reported to be offline as of last Friday.
Libya could resume its oil exports and production from its largest oil field which has been shut for about three weeks. The National Oil Corp. said that oil output at Sahara fields will restart as the force majeure is lifted.
The restart of the operations came after the local governments agreed to meet most of the demands from protestors. Crude oil production at the oil field stood at around 270Mbbls/d earlier. #Brent Rises Above $80 as Conflicts Raise Supply Risks