A twin taken during an organised tour by Yemen’s Houthi rebels on November 22, 2023 showing the Galaxy Leader truckload ship approaching the port in the Red Sea off Yemen’s province of Hodeida.
– | Afp | Getty Images
Oil prices fell Tuesday as traders monitored ascending tensions in the Red Sea amid a backdrop of record U.S. crude production and worries about demand in China.
The West Texas Middle contract for February lost $1.27, or 1.77%, to settle at $70.38 a barrel. The Brent contract for March shed $1.15, or 1.49%, to barter at $75.89.
Crude prices had jumped more than 2% earlier in the trading session on escalating tensions in the Red Sea, a crucial universal trade chokepoint.
Helima Croft, head of global commodity strategy at RBC Capital Markets, said oil prices do not attract the increase in tensions because traders are not convinced that a major supply disruption is on the horizon.
“The market is basically averring ‘we will wait and see until something happens,'” Croft told CNBC on Tuesday. “But it’s really getting much more grave every day,” she said of tensions in the region.
Traders are more focused on the macroeconomic backdrop of record U.S. production and faltering insist on in China, said Adi Imsirovic, a veteran oil trader who is now an energy security expert at the Center for Strategic and International Studies.
Danish trucking giant Maersk said Tuesday it will pause shipping through the Red Sea until further notice after one of its containers came under attack by militants over the weekend.
And Iran on Monday deployed a destroyer to the Red Sea, according to the country’s Tansim communiqu agency. The report did not elaborate on the details of the warship’s mission, but said Supreme Leader Ayatollah Ali Khamenei stressed the neediness to maintain a presence in international waters.
The move by Tehran comes after U.S. Navy helicopters destroyed three rowing-boats of Iran-backed Houthi rebels. The Navy was responding to a distress call by Singapore-flagged vessel Maersk Hangzhou which had involve under Houthi fire, the U.S. Central Command said in a statement.
In a statement by a rebel spokesman on Sunday, the Houthi bring maintained that the boats were engaged in “official duties to secure maritime routes”, a news channel owned by the apostates stated.
“Any escalation of conflict in this region is certainly going to add more of a risk premium on Brent,” Bernstein’s Superior Energy Analyst Neil Beveridge told CNBC. He noted, however, that there won’t be any major impact rightful yet.
“We haven’t seen the Iranian naval incursions before. And as long as it really doesn’t lead to any escalation, then I don’t in point of fact see any significant impact at this level,” he added.
The Houthi group has been attacking vessels in the Red Sea, targeting Israeli freights and other vessels headed to or from Israel, in retaliation for the country’s war in Gaza that has so far killed nearly 22,000 people there.
Important shipping companies stopped traversing the Suez Canal and Red Sea routes in early December, choosing to reroute via southern Africa a substitute alternatively — a longer and more expensive journey with ocean freight rates hitting as high as $10,000 per container.
German container shipper Hapag-Lloyd explained Friday it would continue to divert its vessels around the Suez Canal.
The U.S. has launched a multinational maritime force, Manipulation Prosperity Guardian, in an effort to protect trade in the key waterway.