Brent moves higher amid rising attacks in the Red Sea
The front-month ICE Brent contract gained $1.27/bbl on the day, to trade at $82.47/bbl at 09.00 GMT.
PHOTO: A pumpjack and an oil refinery in Seminole, West Texas. Getty Images
Upward pressure:
Escalation of the crisis in the Middle East and a spillover in the Red Sea have driven Brent futures higher so far this week.
The Houthis have continued striking commercial vessels and oil tankers with ballistic missiles, causing jitters in the oil market, analysts said.
“Tension in the Middle East remains elevated, with the US and its allies striking several targets in Houthi controlled Yemen in response to increased attacks on commercial shipping in the Red Sea,” ANZ Bank’s senior commodity strategist Daniel Hynes said.
Moreover, Goldman Sachs has raised its summer 2024 peak price forecast for the front-month ICE Brent contract by $2/bbl to $87/bbl due to the ongoing hostilities in the Red Sea that would contribute to larger-than-expected draws in commercial crude stocks in the OECD nations, Reuters reported.
Downward pressure:
In the US, oil production has remained at elevated levels in recent weeks, signaling the ongoing expansion in production capacity. This has added some downward pressure to Brent’s price.
The number of rigs drilling for crude oil and natural gas in the US increased by five to 626 units last week, reaching an 11-week high, according to US-based energy firm Baker Hughes.
“The bullish impact of OPEC+ cuts is tempered by sustained production growth outside the coalition,” said SPI Asset Management’s managing partner Stephen Innes.
Meanwhile, Kansas City Federal Reserve Bank president Jeffrey Schmid said that he, like most of his other colleagues, is in no hurry to cut US interest rates in the upcoming months, Reuters reported.
Higher interest rates in the US typically dampen global demand for commodities like oil, as it increases purchasing costs for non-dollar holders.
By Aparupa Mazumder
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