By Ken Afor
On Tuesday, oil prices remained relatively stable as investors closely monitored the consequences of the recent attacks by Yemen’s Iran-aligned Houthi militants on ships in the Red Sea.
These disruptions in maritime trade have compelled companies to redirect their vessels, raising concerns about the impact on oil supply.
At 07:26 GMT, Brent crude futures experienced a slight increase of 6 cents, reaching $78.01 per barrel. Conversely, the front-month U.S. West Texas Intermediate (WTI) crude futures contract, set to expire on Tuesday, witnessed a decrease of 18 cents, settling at $72.29 per barrel.
Additionally, the second-month contract, which displayed more activity, declined by 10 cents or 0.1%, reaching $72.72.
“Given that there has been a prompt collective response from several countries to mitigate attacks, it may not provide much conviction that disruptions may be long-lasting and that led to some reservations reflected in oil prices in today’s session,” said Jun Rong Yeap, a market strategist at IG in Singapore.
On Monday, both benchmarks experienced a rise of over 1% due to concerns regarding shippers redirecting vessels from the Red Sea.
British Petroleum (BP), a leading oil company, has decided to temporarily halt all transits through the Red Sea.
In a similar vein, the oil tanker group, Frontline, has announced that its vessels will steer clear of this waterway. These actions indicate that the crisis is expanding to encompass energy shipments.
Approximately 15% of global maritime transportation passes through the Suez Canal, serving as a vital link between the Red Sea and the Mediterranean Sea. This strategic waterway provides the most efficient shipping route connecting Europe and Asia.
Goldman Sachs analysts have stated that the disturbance in energy transportation within the Red Sea is improbable to significantly impact the prices of crude oil and Liquefied Natural Gas (LNG). This is due to the ability to redirect vessels, ensuring minimal disruption to the market.
“We do estimate that a hypothetical prolonged redirection of all 7 million barrels per day of gross (Northbound and Southbound) oil flows would raise spot crude prices relative to long-dated prices by $3-4/per barrel,” the analysts said.
The United States and its allies are engaged in discussions regarding the establishment of a task force aimed at safeguarding Red Sea routes, in response to the recent surge in shipping attacks.
However, Iran, a longstanding adversary of both Israel and the U.S., has cautioned against this proposed initiative, emphasizing that it would be an erroneous decision.
Oil Minister Javad Owji of Iran has officially confirmed that a cyberattack is responsible for the widespread disruption of petrol stations across the country.
Iran has accused a hacking group of having connections to Israel, which has now claimed responsibility for the attack that caused disruptions at petrol stations throughout the country on Monday. This information was reported by Iranian state TV and Israeli local media.
In the meantime, U.S. officials announced on Monday that they will exert pressure on shippers to provide greater transparency regarding their business dealings with Russian oil, in order to effectively enforce sanctions.
However, they also acknowledged that a significant portion of this trade has already evaded Western scrutiny due to Russia’s establishment of a separate fleet.
