Oil prices rise as Iran sends warship to Red Sea after U.S. destroys Houthi vessels

Posted By: EN Todayon: January 02, 2024In: General Energy News, Oil & Gas News

Oil futures rose Tuesday to kick off the new year after an Iranian warship entered the Red Sea, heightening tensions and fears of crude supply disruptions sparked by attacks on shipping by Iran-backed Houthi rebels in Yemen.

Price action

West Texas Intermediate crude for February delivery
CL00,
+2.02%

CL.1,
+2.02%

CLG24,
+2.02%
rose $1.71, or 2.4%, to $73.36 a barrel on the New York Mercantile Exchange.
March Brent crude
BRN00,
+1.97%

BRNH24,
+1.97%,
the global benchmark, was up $1.86, or 2.4%, at $78.90 a barrel on ICE Futures Europe.
Back on Nymex, February gasoline
RBG24,
+2.18%
rose 2.4% to $2.156 a gallon, while February heating oil
HOG24,
+1.69%
was up 2% at $2.58 a gallon.
February natural gas
NGG24,
+5.49%
rose 4% to $2.615 per million British thermal units.

Market drivers

News reports said Iran’s semiofficial Tasnim news agency on Monday reported that Iran’s Alborz warship had entered the Red Sea without providing details of the ship’s mission.

The U.S. military said Sunday that its forces opened fire on Houthi rebels after they attacked a cargo ship in the Red Sea, killing several of them and destroying three boats in an escalation of the maritime conflict linked to the war in Gaza.

Oil prices rose after the start of the Israel-Hamas war in October, but the risk premium attached to fears of a wider conflict in the region soon evaporated. Crude has seen periodic jumps in price around fears of potential escalation, but fell sharply over the course of the fourth quarter, with both Brent and WTI ending 2023 with a year loss, their first since 2020.

Uncertainty over the demand outlook, a rise in U.S. production to record levels above 13 million barrels a day and doubts about the unity of the Organization of the Petroleum Exporting Countries have served to undercut support for crude.

With demand “expected to remain subdued due to a global economic slowdown and U.S. crude production at record levels, the recovery may be destined to remain limited and short lived,” said Charalampos Pissouros, senior investment analyst at XM, in a note.