Global oil prices extend gains on supply disruptions

December 19, 2023 (MLN): Global oil prices edged up on Tuesday, extending gains from the previous session as concerns of supply disruption rose after attacks by the Houthis on ships in the Red Sea disrupted maritime trade and forced companies to reroute vessels.

Brent crude is currently trading at $78.12 per barrel, up by 0.09% on the day.

While West Texas Intermediate crude is trading at $72.77 per barrel, up by 0.10% on the day.

It is crucial to highlight that oil prices concluded last week with their first weekly gain in eight straight weeks, mainly attributed to a weaker dollar following the U.S. Fed's hint of cutting rates by 75 basis points in 2024.

"Despite price stabilization today, the potential risks caused by supply disruptions and the Middle East unrest could bring significant volatility to oil markets," said Tina Teng, an analyst at CMC Markets in Auckland, as Reuters reported.

"Oil markets may face further upside pressure if geopolitical tensions get escalated," she added.

Oil major BP temporarily paused all transits through the Red Sea and oil tanker group Frontline said on Monday its vessels would avoid passage through the waterway, signs the crisis was broadening to include energy shipments.

About 15% of world shipping traffic transits via the Suez Canal, which connects the Red Sea to the Mediterranean Sea, offering the shortest shipping route between Europe and Asia.

The shipping attacks have prompted the United States and its allies to discuss a task force that would protect Red Sea routes, a move that U.S. and Israeli arch-foe Iran has warned would be a mistake.

"Given that there has been a prompt collective response from several countries to mitigate attacks, it may not provide much conviction that disruptions may be long-lasting and that led to some reservations reflected in oil prices in today’s session," said Jun Rong Yeap, a market strategist at IG in Singapore.

In Iran, Oil Minister Javad Owji on Monday confirmed a nationwide disruption to petrol stations was caused by a cyberattack.

A hacking group that Iran accuses of having links to Israel claimed it carried out the attack that disrupted services at petrol stations across the country on Monday, Iranian state TV and Israeli local media reported.

Meanwhile, the United States will push shippers to disclose more information about their Russian oil dealings to enforce sanctions, U.S. officials said on Monday, while acknowledging that a big chunk of the trade has already escaped Western oversight after Russia built a parallel fleet.

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