Oil Prices Jump Over Transit Disruptions at Red Sea
Amidst an unsteady global demand, crude oil prices climbed after pressures witnessed in the recent past weeks. The global oil market has come under pressure, dragging prices across grades downward following Angola’s decision to leave the Organisation of Petroleum Exporting Countries and Allies (OPEC+) group.
Ahead of the Christmas holiday, the global price of oil rose by over $3 at the close of the session on Friday, data from the market showed.
Majorly, the surge in crude oil prices last week was spurred by rising tension in the Middle East and transit disruptions in the Red Sea, triggering supply fears.
International benchmark Brent crude traded at $79.65 per barrel on Friday, rising by over 4% relative to the closing price of $76.55 a barrel on Friday last week.
West Texas Intermediate (WTI), the American benchmark, traded at $74.20 a barrel at the same time on Friday, for an increase of around 3.8% from last Friday’s session that closed at $71.43 per barrel.
Oil prices increased throughout the week due to naval and commercial ship attacks in the Red Sea that raised fears of possible disruptions to oil supply routes.
The Houthi group announced their intent to target any Israeli-flagged ship in reaction to Israel’s attacks on the blockaded Gaza Strip, Yahya Saree, spokesman of the Houthi group, said via X platform on Nov. 19.
He stressed that the Houthi group would continue to target all ships sailing in the Red Sea and the Arabian Sea that are heading to Israel unless food and medicine are allowed to be given to Palestinians in the Gaza Strip.
Ships passing through the Bab al-Mandeb Strait currently have to change course due to rising tension in the Red Sea, which is putting pressure on oil markets. The strait in question is one of the most important routes in the world for global seaborne commodity shipments.
According to the US Energy Information Agency, total oil shipments via these routes accounted for about 12% of total seaborne-traded oil in the first half of 2023, and liquefied natural gas (LNG) shipments accounted for about 8% of worldwide LNG trade.
Egypt’s Suez Canal Authority reported that the route of 55 ships has been redirected to the Cape of Good Hope at the southern tip of Africa instead of the Bab al-Mandeb Strait since Nov. 19.
If the tension continues, it is estimated that the number of ships choosing alternative routes will gradually increase, with the likelihood increasing of oil supply disruptions. Naira Devaluation Deepens Economic Crisis in Nigeria
Several international companies, including the Italian and Swiss-owned Mediterranean Shipping Company (MSC), Denmark-based shipper Maersk, German shipper Hapag-Lloyd, and France-based shipper CMA CGM, suspended all sailings in the Red Sea after security was compromised.
After the British energy company BP announced that it would stop all tanker traffic in the Red Sea, concerns were raised that seaborne deliveries, which have mostly affected the transportation of goods, could expand to energy shipments. #Oil Prices Jump Over Transit Disruptions at Red Sea
