Oil prices settle up on Red Sea tensions; gains capped by US crude stock build
OIL PRICES settled slightly higher after a choppy trading session on Wednesday as investors worried about global trade disruption and tensions in the Middle East following attacks on ships by Yemen’s Iranaligned Houthi forces in the Red Sea.
Limiting price gains were a surprise US crude inventory build, larger than expected fuel stocks gains and record domestic oil production.
Brent crude futures settled up 47 cents or 0.6% at $79.70 a barrel, while US West Texas Intermediate (WTI) crude settled up 28 cents or 0.4% to $74.22 a barrel.
Both benchmarks briefly turned negative following the Energy Information Administration report and the possibility of a new ceasefire after the leader of Hamas paid his first visit to Egypt for more than a month.
Early in the session, the benchmarks rose by more than $1 as major maritime carriers chose to steer clear of the Red Sea route, with longer voyages increasing transport and insurance costs.
On Wednesday, Greece advised commercial vessels sailing in the Red Sea and the Gulf of Aden to avoid Yemeni waters. Greek ship owners control about 20% of the world’s commercial vessels in terms of carrying capacity.
On Tuesday, Washington launched a task force to safeguard commerce in the region. Sources including shipping and maritime security officials told Reuters that few practical details are known about the initiative or whether it will directly engage in the event of further armed attacks.
The Houthis vowed to defy the USled naval mission and to keep targeting Red Sea shipping in support of Palestinian enclave Gaza’s ruling Hamas movement.
About 12% of world shipping traffic passes up the Red Sea and through the Suez Canal. Although oil supply has been realigned, no shortages have yet emerged, analysts said.
“As long as production is not threatened, the market will eventually adjust to changing supply routes,” said Ole Hansen, an analyst at Saxo Bank.
A European Central Bank policy maker cautioned it was “rather unlikely” interest rates would be cut during the first six months of next year.
On Tuesday, the US Energy department said the government bought 2.1 million barrels of crude for delivery in February, as the US continues to replenish reserves. —