Oil Surges Over 3% Following Red Sea Tanker Attack and Rerouting Concerns.
Oil prices rose more than 3% on Monday as attacks by the Iran-aligned Yemeni Houthi group on ships in the Red Sea disrupted maritime trade and raised concerns about supply disruption.
A Norwegian-owned vessel was attacked, leading oil major BP to temporarily pause all transits through the Red Sea.
Brent crude futures climbed 3.7% to $79.37 a barrel, while U.S. West Texas Intermediate crude rose 3.4% to $73.87. The attacks added to existing supply concerns, contributing to the upward movement in oil prices.
“The rise in geopolitical risk premium, which has come in the form of regular hostilities towards commercial vessels in the Red Sea by Iran-backed Houthi rebels plays its indisputable part in oil’s resurrection,” said Tamas Varga, an analyst at oil broker PVM.
About 15% of global shipping traffic passes through the Suez Canal, making it a crucial route for trade between Europe and Asia.
Despite disruptions caused by attacks in the Red Sea, oil prices faced limitations due to ample oil supply. Brent and U.S. crude remained in contango, indicating a well-supplied physical market. Russia announced an increase in oil export cuts in December, supporting global oil prices.
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However, some analysts expressed skepticism about Russia’s commitment to voluntary output cuts.
“In reality it is just re-packaging weather-related halts in exports,” he said.
