Oil prices jumped on Friday after the U.S. and U.K. carried out air strikes against Houthi rebel targets in Yemen in retaliation for persistent attacks on ships in the Red Sea drove fresh jitters over potential supply disruption.
Strength in oil led prices for both U.S. and global benchmark crude futures to turn higher for the week.
West Texas Intermediate crude
for February delivery
climbed by $2.20, or 3.1%, to $74.22 a barrel, with prices for the front-month contract turning higher for the week, up around 0.5% from last Friday’s settlement, FactSet data show.
March Brent crude
the global benchmark, rose $2.71, or 3.5%, to $80.12 a barrel on ICE Futures Europe, pointing toward the highest finish in more than two weeks. Prices traded around 1.7% for the week.
climbed 2.4% to $2.1647 a gallon, trading up by 2.8% for the week, while February heating oil
rose 2.2% to $2.7335 a gallon, eying a weekly rise of 4.7%.
Natural gas for February
rose 7.9% to $3.343 per million British thermal units, on track for a weekly rise of more than 15%.
Current oil prices do “not reflect a geopolitical risk premium, so prices could rise to over $80 per barrel should tensions in the Middle East continue to escalate,” Rob Thummel, senior portfolio manager and managing director of Tortoise, said in emailed commentary Friday.
U.S. benchmark prices remain below that key price level, but global benchmark crude touched highs above $80 during Friday’s trading.
In a bid to deter further attacks on ships in the Red Sea, U.S. and British forces on Thursday carried out joint strikes on more than a dozen targets in Yemen used by Iranian-backed Houthis.
The Houthi rebels, who began their attacks after war broke out between Israel and Gaza last year, launched their biggest barrage yet of missiles and drones at Red Sea shipping vessels this week. The Red Sea links the Middle East and Asia to Europe via the Suez Canal and the narrow Bab el-Mandeb Strait, where an estimated $1 trillion of goods pass through each year.
“With one of the most critical oil-supply channels to the West under threat, it is not surprising to see crude prices rising in a dynamic that could create further upside for the price of the barrel should tensions continue to escalate in the Middle East,” said Ricardo Evangelista, senior analyst at ActivTrades.
Nonstop attacks on ships have forced detours, including around the Cape of Good Hope in South Africa, but that requires much longer travel times and incurs higher costs, and many observers are growing concerned about globally supply chains.
Responding to the strikes, Mohammed Abdul-Salam, the Houthis’ chief negotiator and spokesperson, said the U.S. and Britain were “wrong if they thought that they would deter Yemen from supporting Palestine and Gaza.” Houthi “targeting will continue to affect Israeli ships or those heading to the ports of occupied Palestine,” he wrote online.
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Oil prices traded mostly higher in the wake of data Friday showing U.S. wholesale prices fell in December for a third month in a row. Data released Thursday had shown that the rate of inflation over the past year moved up to 3.4% from 3.1% in the prior month.
Meanwhile, natural-gas futures were poised to post a climb of more than 15% for the week, as winter storm forecasts continue to boost the commodity’s demand prospects.
That would be the biggest weekly percentage rise for a front-month contract since June, FactSet data show.
“Natural-gas demand is likely to hit during this cold snap,” said Phil Flynn, senior market analyst at the Price Futures Group. He said that he expects to see reports of well freeze-offs and that production most likely will fall. Freeze-offs refer to the freezing of a well, which leads to a shutdown.
“We could see record-breaking drawdowns in inventory, especially if the cold weather decides to stay around for a while,” said Flynn.