Brent moves up as tensions in the Red Sea intensify

The front-month ICE Brent contract gained $1.13/bbl on the day, to trade at $78.10/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures have moved up after the Israel-Hamas conflict intensified tensions in the Red Sea and forced maritime traders and shipping companies to reroute their vessels and avoid the East-West trade route through the Suez Canal.

Airstrikes and drone attacks on commercial ships by the Yemen-based militant group Houthi have brought back supply disruption concerns in the oil market, helping Brent’s price gains today.

Oil major BP said it had temporarily paused all shipping operations in the Red Sea because of these attacks. Meanwhile, analysts speculate that these attacks are backed by Iran, and come in retaliation to Israel refusing to a ceasefire in Gaza.

“Not only has the [oil] market had to adjust to the Russian-Ukraine war but now because of Iranian support of Hamas and the Houthi rebels, there is a new level of risk,” said Price Futures Group’s senior market analyst Phil Flynn.

Downward pressure:

Some downward pressures acting on Brent today come from weak oil demand projections from China.

A recent report by market intelligence provider JLC stated that China’s refinery run rates dropped in November as fuel demand in the second-largest crude importer of the world weakened and Chinese refiners “faced the constraint of quota on fuel exports and bad export margins.”

China processed about 59.53 million mt of crude in November, a month-on-month decline of about 3.8%, JLC reported citing data released by China’s National Bureau of Statistics (NBS).

“Muted Chinese demand amid a jump in Asia-bound cargoes is giving cause for a prompt rethink on the bullish reflationary impulse,” said SPI Asset Management’s managing partner Stephen Innes.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online