Adedapo Adesanya
By Adedapo Adesanya
The oil market rose further on Tuesday, extending the previous session’s gains after attacks by Yemen’s Iran-aligned Houthi militants on ships in the Red Sea disrupted trade, leading vessels to reroute.
With supply disrupted, the price of Brent crude futures rose by $1.28 or 1.6 per cent to $79.23 a barrel, and the US West Texas Intermediate (WTI) crude futures increased by 97 cents or 1.3 per cent to settle $73.44 per barrel.
The US on Tuesday announced the creation of a task force called Operation Prosperity Guardian to safeguard Red Sea commerce from attacks by Iran-backed Yemeni militants.
The US Secretary of Defense, Mr Lloyd Austin, said Britain, Bahrain, Canada, France, Italy, the Netherlands, Norway, Seychelles and Spain were among the nations involved in the Red Sea security operation, which will conduct joint patrols in the southern Red Sea and the adjacent Gulf of Aden.
The attacks have begun to take a toll on global trade, disrupting a key trade route that links Europe and North America with Asia via the Suez Canal.
An oil major, BP, paused all Red Sea transits, and a slew of top shipping firms, including Maersk, started diverting shipments normally made through Suez around the Cape of Good Hope on Africa’s southern tip.
The new route around Africa adds days to journey times and raises costs, and could see prices of crude jump in the coming days.
The list of companies avoiding the Red Sea continued to grow on Tuesday.
Meanwhile, the rebel Houthis have vowed to defy the US-led naval mission and keep hitting Israeli targets in the region as a result of the war between Israel and the Palestinian Islamist group, Hamas.
Though the attacks on shipping have boosted the risk premium, other analysts said impacts on oil supply are currently limited.
Goldman Sachs analysts also said the disruption was unlikely to have a large effect on crude and liquefied natural gas (LNG) prices because opportunities to reroute vessels suggest production should not be directly affected.
Crude oil inventories in the US rose this week by 939,000 barrels for the week ending December 15, according to the American Petroleum Institute (API), after a 2.349-million-barrel draw in crude inventories in the week prior. Analysts had expected inventories to fall by 2.233 million barrels.
API data shows a net build in crude oil inventories in the United States of just over 18 million barrels so far this year.
Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.
