Oil prices initially rose due to Red Sea tensions and potential shipping disruptions

22 Dec 2023 , 10:20 AM

Oil prices edged higher in early trading on Friday, December 22, as ongoing tension in the Red Sea continued to raise concerns about potential disruptions to shipping routes. However, the upward momentum was tempered by the surprise announcement of Angola’s decision to leave the Organization of the Petroleum Exporting Countries (OPEC), raising questions about the cartel’s effectiveness in managing global oil supply.

Brent crude futures, the global benchmark, rose 23 cents to $79.62 a barrel by 0121 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up 22 cents at $74.11 a barrel. Both contracts had climbed over 1% on Thursday, propelled by attacks by the Houthi rebel group on Yemeni targets near the Red Sea.

The Houthi attacks, claimed as retaliation for Saudi-led airstrikes on Yemen, heightened concerns about the security of oil tankers traversing the strategic waterway. The Red Sea is vital for transporting Middle Eastern oil exports to Europe and Asia, and any significant disruption could send prices surging.

However, limiting the oil price rally was the unexpected news of Angola’s decision to withdraw from OPEC, effective 2024. The Angolan government cited ‘domestic strategic interests’ as the reason for the move, fueling speculation about internal disagreements within the oil cartel. Angola, Africa’s second-largest oil producer, had been a member of OPEC since 2007.