Oil Slips on Mideast Jitters: US, UK Strikes Spur Caution Despite Supply Flows

15 Jan 2024 , 08:12 AM

Following operations by US and British forces to deter the Houthi movement in Yemen from targeting ships in the Red Sea, traders were alert to the possibility of a disruption in the Middle East’s oil supply, which caused oil prices to decline on Monday.

After closing 1.1% higher on Friday, Brent crude futures dropped 31 cents, or 0.4%, to $77.98 a barrel. US WTI crude fell 32 cents, or 0.4%, to $72.36 a barrel after rising nearly 1% in the previous trading session.

The benchmarks soared more than 2% this week to record their highest intraday levels this year after U.S. and British forces launched dozens of air strikes against Houthi forces in retribution for months of attacks on Red Sea commerce that the Iran-backed militants described as a response to conflict in Gaza.

After the US launched another strike overnight, raising tensions, the Houthi militia warned a ‘strong and effective response’ on Sunday. Later, the U.S. claimed to have shot down a missile fired from Houthi insurgent territories in Yemen that was aimed at one of its ships.

According to President Joe Biden, the US had communicated with Iran in secret on the Houthi attacks.

Following the strikes, a number of tanker owners avoided the Red Sea, and many tankers altered their routes on Friday. Nevertheless, traders continued to monitor Iran’s reaction and its potential effects on shipments via the Strait of Hormuz, the most significant oil chokepoint in the world.

After closing the 300,000 barrel-per-day Sharara field on January 7, protesters in Libya threatening to close two additional oil and gas facilities.

Power and natural gas firms in the United States were getting ready on Friday for the expected extreme cold for the Martin Luther King Day holiday weekend, which will restrict supplies by freezing wells and result in record gas demand.

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