Oil prices rise following drone attack on US forces in Jordan

January 29, 2024 (MLN): Global oil prices commenced the week on an upward trajectory amid supply disruptions resulting from a drone attack on U.S. forces in Jordan.

Brent crude is currently trading at $83.21 per barrel, up by 0.15% on the day.

Meanwhile, West Texas Intermediate crude (WTI) is trading at $78.22 per barrel, up by 0.15% compared to the previous close.

Both benchmarks recorded significant gains of 6.22% and 6.46%, respectively, last week, marking their most substantial weekly increase since August 2023.

The attack on U.S. troops in a drone strike in Jordan raised concerns of a wider conflict in the oil-rich Middle East, as Reuters reported.

"We believe the death of three U.S. service members today in Jordan marks a critical inflection point in the ongoing conflict in the Middle East and raises a specter of a more substantial U.S. involvement in the war," RBC Capital analyst Helima Croft said in a note.

The analyst further added that a more confrontation with Iran raises the specter of regional energy supply disruptions.

Commodities trader Trafigura said on Saturday it was assessing the security risks of further Red Sea voyages after firefighters put out a blaze on a tanker attacked by Yemen's Houthi group a day earlier.

"Disruptions to supply have been limited, but that changed on Friday after an oil tanker operating on behalf of Trafigura was hit by a missile off the coast of Yemen," ANZ analysts said in a note.

"With oil tankers linked to the U.S. and UK now under threat of attack, the market is likely to reprice the risk of disruptions."

Russia will likely cut exports of naphtha, a petrochemical feedstock, by some 127,500 - 136,000 barrels per day, or around a third of its total exports, after fires disrupted operations at refineries on the Baltic and Black Seas, according to traders and LSEG ship-tracking data.

On February 01, leading ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, will meet online.

However, OPEC+ will likely decide its oil production levels for April and beyond in the coming weeks, OPEC+ sources said, as the meeting would take place too early for decisions to be made on further output policy.

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