Oil Rises on Red Sea Tension, US Economic Growth
Oil prices increased over sustained disruption at the Red Sea route, garnished by conflicts in the Middle East. Positive price movement was also supported by strong economic activity in the US, the world’s largest oil-consuming country, supported upward price movements.
In the latest developments, the Houthis attacked a crude oil tanker carrying Russian oil products in the Gulf of Aden on Friday. The damage to the ship or cargo is still being assessed. Russian cargo was considered relatively safe in the Red Sea transit corridor.
The conflict in the Red Sea is likely to add shipping costs, transit time and risk premium for some of the crude oil shipments and is likely to support crude oil prices, ING commodities analysts said in a note.
Brent price rose 42 basis points to $83.30 per barrel. The American benchmark, West Texas Intermediate (WTI), traded at $78.38 per barrel, up 0.47% from Friday’s close of $78.01 per barrel.
Tensions have escalated in the Red Sea amid Houthi attacks on commercial ships allegedly linked with Israel. The conflict in the region increased concerns about a wider conflict and supply disruptions in the Middle East.
The US military said on Friday it shot down a Houthi anti-ship ballistic missile in the Gulf of Aden. On Saturday, the US Central Command (CENTCOM) announced via X that the US shot down an anti-ship missile belonging to the Iranian-backed Houthis in Yemen in the Red Sea.
A US statement said the missile was detected in the area controlled by the Houthis and that it was determined that it posed a threat to commercial ships and the US Navy in the region.
Yemen’s Houthi rebels reported fresh airstrikes by the US and its allied British forces on the western province of Hodeidah on Saturday. The Houthi-run satellite channel Al-Masirah reported that ‘the American-British aggression targeted the Ras Issa area in Hodeidah Governorate with two raids.’
The US said it conducted a self-defence strike against a Houthi anti-ship missile in the Red Sea. On Sunday, Britain said that it had shot down a Houthi drone in the Red Sea that was poised to attack.
Also on Sunday, the Jordanian government announced an attack on US forces at Tenef Base on the Syrian border. It was reported that three US soldiers were killed in the unmanned aerial vehicle attack. Selloffs Provoke Spike in Nigerian Treasury Bills Yield
US President Joe Biden stated that they would continue to fight against the aggression, and those responsible would be held accountable. The risk premium for the crude oil market shot up last week as geopolitical tensions around the Red Sea transit route continued to escalate.
Brent has been firm at around US$84/bbl this morning after gaining nearly 6% over the last week. NYMEX WTI also firmed up to US$78.4/bbl this morning. The spread between March 2024 – April 2024 contract increased to a backwardation of US$0.6/bbl on Friday compared to around US$0.1/bbl at the start of the month highlighting the oil supply risk in the immediate term.
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