By Adedapo Adesanya
Brent crude neared $80 on Wednesday, gaining 47 cents or 0.6 per cent to trade at $79.70 per barrel as investors worried about global trade disruption and tensions in the Middle East following attacks on ships by Yemen’s Iran-aligned Houthi forces in the Red Sea.
Also, the US West Texas Intermediate crude appreciated by 28 cents or 0.4 per cent in the midweek session to close at $74.22 a barrel, as prices continued to rise because companies have begun to divert vessels away from the Red Sea with the rebel group signaling that they would not change course from their attacks.
The Houthis have launched at least 100 attacks on commercial vessels in the Red Sea in the past four weeks, targeting 12 separate vessels using ballistic missiles and drones. The attacks have escalated in tandem with Israel’s assault on Gaza.
This is happening even as the US with nine other nations – the UK, Bahrain, Canada, France, Italy, the Netherlands, Norway, Seychelles, and Spain, created an international task force dubbed Operation Prosperity Guardian to protect the Red Sea shipping lanes.
Doubt remains as to whether the task force will be able to halt Houthi attacks in the future.
About 12 per cent of world shipping traffic passes up the Red Sea and through the Suez Canal and although oil supply has been realigned, no shortages have yet emerged, analysts said.
The increase in oil prices has been somewhat muted, however, due to rising US oil production.
The latest forecast from the Energy Information Administration (EIA) shows US producers pumped out almost 13.5 million barrels per day last month, exceeding the agency’s year-ago prediction by a million barrels.
The US EIA reported an estimated inventory increase of 2.9 million barrels for the week to December 15.
This followed a weekly inventory decline of 4.3 million barrels for the previous week. The estimate also came out a day after the American Petroleum Institute (API) reported its inventory estimate, which saw oil stocks adding close to a million barrels over the week to December 15.
On the economic front, data suggests central bank action to ease inflation in Europe has made a meaningful difference. Despite this, analysts warned that it is unlikely interest rates in the EU would be cut during the first six months of next year.
In Britain, which is no longer a member of the EU, inflation plunged in November to its lowest rate in more than two years, strengthening the case for rate cuts.
Dipo Olowookere