Oil Surge as Middle East Erupts, Tankers Divert

16 Jan 2024 , 09:09 AM

Tuesday’s minor increase in oil prices was due to the escalation of the Middle East situation and the fact that additional tankers were rerouting their routes away from the Red Sea as a result of attacks by the Houthi movement in Yemen.

Brent crude futures increased by 12 cents, or around 0.2%, to $78.27 per barrel. On Monday, the contract finished 14 cents lower.

After a national holiday in the US on Monday, U.S. West Texas Intermediate crude fell 17 cents, or 0.2%, to $72.52 per barrel.

The Houthi movement in Yemen has promised to continue its attacks following American and British raids on its locations in the country, and it has now expanded its objectives in the Red Sea region to include American ships, an official from the Iran-allied organization said on Monday.

Due to the disturbances, more oil tankers were avoiding the southern Red Sea on Monday, which raised the cost of transportation and lengthened the time it took to move oil from one location to another.

The U.S.-led Combined Maritime Forces (CMF), stationed in Bahrain, issued a warning to all ships on Friday to steer clear of the Bab al-Mandab Strait at the southern end of the Red Sea for a few days in response to the American and British strikes, according to tanker association INTERTANKO.

When Iran captured a tanker last week south of the Strait of Hormuz, another important shipping route, tensions in the region over shipping also extended to the opposite side of the peninsula.

As a result of the increasing unrest in the region, oil prices increased by 2% last week; however, analysts believe that the gains may be limited because there was no direct impact on oil output.

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