Oil prices rise as Middle East tensions continue

Posted By: EN Todayon: January 16, 2024In: General Energy News, Oil & Gas News

Oil futures rose Tuesday as U.S. traders returned from a three-day weekend, monitoring continued tensions in the Middle East that has disrupted tanker traffic and poses a threat to crude supplies from the region.

Price action

West Texas Intermediate crude
CL00,
+0.40%

CL.1,
+0.40%

CLG24,
+0.40%
for February delivery rose 39 cents, or 0.5%, to $73.07 a barrel on the New York Mercantile Exchange. Nymex WTI futures didn’t settle Monday due to the Martin Luther King Jr. Day holiday.
March Brent crude
BRN00,
+0.79%

BRNH24,
+0.79%,
the global benchmark, was up 69 cents, or 0.9%, at $78.84 a barrel on ICE Futures Europe, after falling 0.2% on Monday.

Market drivers

Iran-backed Houthi militants operating out of Yemen on Monday vowed to continue attacking U.S. and international targets in the Red Sea in response to Israel’s operations in Gaza, news reports said. U.S. Central Command said a Houthi missile struck the Gibraltar Eagle, a U.S. bulk carrier, on Monday without causing significant injury or damage.

Oil futures rose Friday in the wake of an assault by U.S. and U.K. forces on Houthi militants, but finished well off session highs and booked weekly losses. Meanwhile, data shows tanker traffic through the Red Sea and the Bab el-Mandeb waterway, a crucial chokepoint, has fallen off significantly.

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Crude has popped higher around incidents in the Red Sea and near the Strait of Hormuz, but has struggled to build a geopolitical risk premium since the start of the Israel-Hamas war in October. Shipping woes have been seen as a boost for U.S. crude exports

Read:Why Red Sea chaos is driving oil buyers ‘into the arms of U.S. shale producers’

“For commodity markets, the increased tension poses supply risks, with energy markets most vulnerable. However, for oil and LNG (liquefied natural gas), we are not seeing any fundamental impact on supply yet,” said Ewa Manthey and Warren Patterson, analysts at ING, in a note.

“Refiners and consumers could initially face some tightness as supply chains adjust to the longer route. Given the uncertainty and the risk of a spillover, oil prices are likely to remain relatively well supported,” they wrote. “In order to see oil prices breaking significantly higher, we will need to see even further escalation and/or a meaningful loss in oil supply.”