By Ken Afor
Oil prices increased Monday due to risong concerns over potential disruptions in oil supply caused by the Houthis’ attacks on ships in the Red Sea.
Furthermore, the additional support came from Russia’s decision to decrease its exports in December.
Shipping companies, such as MSC, the largest container shipping line in the world, and A.P. Moller-Maersk, announced during the weekend their decision to circumvent the Suez Canal due to the escalating attacks by Houthi militants on commercial ships in the Red Sea.
Meanwhile, at 09:10 GMT, Brent crude futures climbed by 17 cents, equivalent to a 0.2% increase, reaching $76.72 per barrel. Simultaneously, U.S. West Texas Intermediate (WTI) crude experienced a rise of 48 cents, representing a 0.7% growth, and settled at $71.91.
The crude benchmarks experienced marginal increases in the previous week, marking a positive shift after seven consecutive weeks of decline. This upturn was influenced by the U.S. Federal Reserve meeting, which instilled optimism by suggesting an end to interest rate hikes and the possibility of future cuts.
“The rise in geopolitical risk premium, which has come in the form of regular hostilities towards commercial vessels in the Red Sea by Iran-backed Houthi rebels plays its indisputable part in oil’s resurrection,” said Tamas Varga of oil broker PVM.
Furthermore, Russia announced on Sunday its commitment to further reduce oil exports in December, potentially by 50,000 barrels per day or even more. This decision, made earlier than anticipated, reflects the collective efforts of the world’s largest oil exporters to stabilize global oil prices.
Following a storm and scheduled maintenance on Friday, Moscow has decided to suspend approximately two-thirds of loadings of its primary export grade, Urals crude, from ports.
In a note, CMC Markets analyst Tina Teng highlighted that a weakened dollar has also provided support to oil. This is because a weaker dollar makes oil, which is denominated in dollars, more affordable for foreign buyers.
Additionally, it often indicates a higher appetite for investor risk.
