Oil prices down for the week despite Red Sea developments
Business
China buys record levels of crude in 2023
HOUSTON (Reuters) – Oil rose 1 per cent on Friday as an increasing number of oil tankers diverted course from the Red Sea following overnight air and sea strikes by the US and Britain on Houthi targets in Yemen after attacks on shipping by the Iran-backed group.
Brent crude futures settled 88 cents, or 1.1pc, higher at $78.29 a barrel. The session high was up over $3 to more than $80, its highest this year.
US West Texas Intermediate (WTI) crude futures climbed 66 cents, or 0.9pc, to $72.68, paring gains after touching a 2024 high of $75.25.
While the diversions were expected to push up the cost and time it take to transport oil, supplies have not yet been impacted, analysts and industry experts noted, easing some of the earlier gains in prices.
For the week, Brent was down 0.5pc and WTI 1.1pc lower. Earlier in the week, sharp price cuts by top exporter Saudi Arabia and a surprise build in US crude stockpiles spurred supply worries.
"Although the lack of shipping through the Red Sea... does create transportation issues for some crude supplies, the impact on the physical oil markets is, thus far, minimal," said Matt Stephani, president at investment advisory firm Cavanal Hill Investment Management.
"If the conflict were to spread to the other side of the Arabian Peninsula... oil markets may react much more significantly," Stephani added.
Tanker companies Stena Bulk, Hafnia and Torm all said they had decided to halt all ships heading towards the Red Sea.
However, Suez Canal Authority head Osama Rabie said traffic is regular in both directions and there is no truth to reports navigation has been suspended due to developments in the Red Sea.
The US and UK strikes come in retaliation for Houthi attacks since October on commercial vessels in the Red Sea in a show of support for Palestinian militant group Hamas in its fight against Israel.
The escalation has fed worries the Israel-Palestine war could widen into a broader conflict in the Middle East, disrupting oil supplies. Iran seized a tanker on Thursday carrying Iraqi crude south of the strait destined for Turkey.
Houthi militants also mistakenly targeted a tanker carrying Russian oil in a missile attack on Friday off Yemen, British maritime security firm Ambrey said.
Diversion of tankers around South Africa will also push up freight rates as ships take longer routes. The Red Sea, a key route between Europe and Asia, accounts for about 15pc of the world's shipping traffic.
The US expects Houthis to attempt some sort of retaliation as US. and Britain struck just under 30 different locations in Yemen, a senior US military official said.
A Houthi spokesperson said the group would continue to target shipping heading toward Israel. Iran warned that the attack on Houthis will fuel "insecurity and instability" in the region, according to Iranian state media.
Saudi Arabia called for restraint and "avoiding escalation" and said it was monitoring the situation with great concern.
Also supporting oil prices, China bought record levels of crude oil in 2023 as demand recovered form a pandemic-induced slump despite economic headwinds in the world's biggest energy consumer.
The premium of the first-month Brent contract to the six-month contract rose to as much as $2.09 a barrel on Friday, the highest since early November, in a sign that markets perceive tighter supply for prompt delivery.
On the supply side, Baker Hughes said the US oil rig count, an indicator future production, fell by two to 499 this week.
In Libya, the spokesperson for protesters who have threatened to shut down two oil and gas facilities in Tripoli said they have decided to extend Friday's deadline for closing the facilities by 24 hours as there are negotiations with mediators.
