Brent rises amid escalating aggression in the Red Sea

The front-month ICE Brent contract moved $1.72/bbl up on the day, to trade at $79.82/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures have risen further after drone attacks and airstrikes by Iran-aligned Houthi militants raised crude oil supply concerns and disruption in global trade routes.

The Houthis have targeted commercial vessels in the Red Sea’s key Bab al-Mandab shipping lane, blocking access to the Suez Canal. These vessels are headed towards Israel, the Yemen-based militant group has said, without providing any proof of this.

“That [Bab al-Mandab] route accounts for 12% of global seaborne trade,” said Price Futures Group’s senior market analyst Phil Flynn. Several oil majors and shipping companies have had to reroute their ships to avoid becoming a target in the Israel-Hamas conflict.

Opting for alternative routes to circumvent the Bab al-Mandab Strait is contributing to prolong voyages and delay shipments, which could increase the costs of various goods, Flynn commented.

Downward pressure:

Brent futures felt some downward pressure after the American Petroleum Institute (API) reported a 939,000 bbls rise in commercial US crude inventories in the week ended 15 December.

Oil market analysts expected the US crude inventories to drop by 2.23 million bbls in the week. However, weak demand indications from the world’s leading oil consumer have capped Brent’s price gains in recent days.

The broadly followed US government data on crude oil stockpiles from the US Energy Information Administration (EIA) is due later today.

By Aparupa Mazumder

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