NEW YORK: Oil prices settled slightly higher after a choppy trading session on Wednesday (Dec 20) as investors worried about global trade disruption and tensions in the Middle East following attacks on ships by Yemen’s Iran-aligned Houthi forces in the Red Sea.
Limiting price gains were a surprise US crude inventory build, larger than expected fuel stocks gains and record domestic oil production.
Brent crude futures settled up 47 cents, or 0.6%, at US$79.70 (RM371.20) a barrel, while US West Texas Intermediate crude settled up 28 cents, or 0.4%, to US$74.22 (RM345.67) a barrel.
Both benchmarks briefly turned negative following the EIA report and the possibility of a new
ceasefire after the leader of Hamas paid his first visit to Egypt for more than a month.
Early in the session, the benchmarks rose by more than US$1 as major maritime carriers chose to steer clear of the Red Sea route, with longer voyages increasing transport and insurance costs.
On Wednesday, Greece advised commercial vessels sailing in the Red Sea and the Gulf of Aden to avoid Yemeni waters. Greek ship owners control about 20% of the world’s commercial vessels in terms of carrying capacity.
“The possibility of a significant price downturn would appear likely on first suggestion of stabilisation of cargo transits through the Red Sea corridor,” said John Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.
On Tuesday, Washington launched a task force to safeguard commerce in the region. Sources including shipping and maritime security officials told Reuters that few practical details are known about the initiative or whether it will directly engage in the event of further armed attacks.
About 12% of world shipping traffic passes up the Red Sea and through the Suez Canal. Although oil supply has been realigned, no shortages have yet emerged, analysts said.
“As long as production is not threatened, the market will eventually adjust to changing supply routes,” said Ole Hansen, an analyst at Saxo Bank. – Reuters
