Oil Prices Surge With Continuous Attacks On Red Sea Shipping Route

Crude oil saw a price surge this Tuesday, mainly driven by concerns about ship safety in the Red Sea. According to Bloomberg, the crude oil increase was the largest in over a week. The cargo ship, “MSC United,” travelling from Saudi Arabia to Pakistan, was the target of the attack.

Notably, this incident happened despite the United States and the United Kingdom’s increased military presence in the area, which was announced the week prior as part of Operation Prosperity Guardian. Nevertheless, several countries—including Denmark, Norway, Italy, France, Spain, and Sweden—withdrew from the alliance, stating they preferred to function under NATO leadership instead of American authority.

Oil Tanker — Image for representation purpose only

MSC announced its intention to divert ships initially scheduled to transit through the Suez Canal to the Cape of Good Hope in South Africa despite increased presence from the United States and the United Kingdom.

WTI was trading at about $75 per barrel earlier, but Brent crude surged beyond $80 per barrel, hitting $81 on Tuesday. This implies that despite the possibility of supply disruptions, market sentiment is still centred on the careful balancing act between supply and demand, with signs of weakness in the latter.

Senior analyst at Reuters Phillip Nova pointed out that there is still uncertainty about how the crisis will affect global supplies. Although vessels have been redirected and transportation lanes interrupted, there is ongoing discussion about the degree of the impact on world supplies.

Senior Phillip Nova analyst Priyanka Sachdeva told Bloomberg that the situation’s complexity has been made worse by the thin market depth resulting from the present Christmas season. According to a Bloomberg report, oil prices are still expected to fall for the first time in three years, even with the recent uptick.

Reference: Oil Price

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