Gains in oil prices continue as supply chains are disrupted by Red Sea strikes

19 Dec 2023 , 09:44 AM

Tuesday’s rises in oil prices were built upon the disruption of maritime trade and the need for corporations to reroute vessels caused by attacks on ships in the Red Sea by Houthi terrorists from Yemen, who are affiliated with Iran.

Brent crude futures increased by 17 cents, or 0.2%, to $78.12 a barrel. Tuesday’s expiration of the front-month U.S. West Texas Intermediate oil futures contract saw a 14-cent increase to $72.61 a barrel. At $72.91, the more active second-month contract increased by 9 cents, or 0.1%.

On Monday, both benchmarks saw a more than 1% increase due to worries that merchants may be rerouting their vessels away from the Red Sea.

In an indication that the issue was spreading to include energy supplies, oil company BP temporarily halted all transits via the Red Sea, while oil tanker group Frontline announced on Monday that its vessels would not pass through the canal.

The Suez Canal, which links the Red Sea to the Mediterranean Sea and provides the quickest shipping route between Europe and Asia, is used by 15% of all international marine traffic.

Tehran, the main adversary of the United States and Israel, has cautioned that creating a task force to guard Red Sea lines would be a mistake, but the attacks on ships have forced the country and its allies to consider it.

Iran’s Oil Minister Javad Owji said on Monday that a cyberattack was to blame for the countrywide outage of gas outlets.

Iranian state TV and Israeli local media stated that the attack, which halted services at petrol stations nationwide on Monday, was carried out by a hacker group that Iran claims of having ties to Israel.

In the meanwhile, U.S. officials announced on Monday that in an effort to enforce sanctions, the United States will press shippers to provide further details about their transactions with Russia for oil, even though they acknowledged that a significant portion of the trade had already eluded Western monitoring due to Russia’s construction of a parallel fleet.

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