Fri. Mar 1st, 2024
Oil rises on Red Sea jitters, Russian export cutOil rises on Red Sea jitters, Russian export cut_title

LONDON: Oil rises on Red Sea jitters, Russian export cut Oil prices climbed on Monday, buoyed by heightened tensions in the Red Sea following attacks by the Houthis on ships, sparking concerns about potential disruptions in oil supply. Furthermore, the market received an additional boost from Russia’s announcement of a planned reduction in oil exports for December. The combination of geopolitical uncertainties and production adjustments contributed to the upward momentum in oil prices during the trading session.

Oil prices climbed on Monday, propelled by escalating tensions in the Red Sea after Houthi militants in Yemen intensified their attacks on commercial vessels, prompting major shipping firms, including the world’s largest container shipping lines MSC and A.P. Moller-Maersk, to announce their avoidance of the Suez Canal over the weekend.

Brent crude futures gained 17 cents, or 0.2%, reaching $76.72 a barrel by 0910 GMT, while US West Texas Intermediate crude saw an increase of 48 cents, or 0.7%, reaching $71.91.

Last week, both crude benchmarks experienced modest gains, breaking a seven-week decline streak. The positive momentum followed a US Federal Reserve meeting that fueled optimism about the end of interest rate hikes and the potential for rate cuts.

“The rise in geopolitical risk premium, evidenced by regular hostilities towards commercial vessels in the Red Sea by Iran-backed Houthi rebels, plays its indisputable part in oil’s resurrection,” commented Tamas Varga of oil broker PVM.

In a move further supporting oil prices, Russia announced on Sunday its intention to deepen oil export cuts in December by potentially 50,000 barrels per day or more, ahead of schedule. This decision comes as major oil exporters aim to bolster global oil prices.

The announcement followed Moscow’s suspension of about two-thirds of loadings of its main export grade Urals crude from ports on Friday, citing a storm and scheduled maintenance.

Oil prices also found support from a weakened dollar, according to CMC Markets analyst Tina Teng. A weaker dollar makes dollar-denominated oil more affordable for foreign buyers and typically signals increased investor risk appetite. The confluence of geopolitical tensions, production adjustments, and currency dynamics contributed to the positive trajectory in oil markets during Monday’s trading session.

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