Dec 18, 2023: Oil prices surged in Asian trading on Monday, climbing nearly 1% at the outset, supported by reduced exports from Russia and concerns over oil supply disruption due to attacks by the Houthis on ships in the Red Sea.
At 0413 GMT, Brent crude futures increased by 32 cents to $76.87 a barrel, marking a 0.4% rise, while U.S. West Texas Intermediate (WTI) crude stood at $71.77 a barrel, up 34 cents, equivalent to a 0.5% increase.
Analyst Tony Sycamore from IG noted, “The adverse weather in Russia and the Houthis’ attack on ships near Yemen have contributed to the stronger opening this morning.”
Russia announced intentions to deepen oil export cuts in December by potentially 50,000 barrels per day or more, earlier than scheduled, as major exporters aim to bolster global oil prices.
This decision followed Moscow’s suspension of about two-thirds of loadings of its primary export grade Urals crude from ports due to storm-related issues and planned maintenance.
In response to heightened Houthi attacks in the Red Sea, major shipping firms, including MSC and A.P. Moller-Maersk, declared their avoidance of the Suez Canal.
The Bab al-Mandab Strait, a critical global shipping route, particularly for crude oil and fuel, faces disruptions due to these assaults, affecting shipments bound for the Mediterranean via the Suez Canal or the nearby SUMED pipeline, as well as commodities heading to Asia, including Russian oil.
The recent uptick in oil prices comes after both Brent and WTI snapped their longest streak of weekly declines in five years, following a Federal Reserve meeting that indicated potential interest rate cuts ahead, alleviating concerns about a harsh economic downturn and crude oil demand.
Sycamore pointed out, “Last week’s dovish Fed meeting eliminates the risks of a severe economic downturn for the U.S. and, consequently, for future crude oil demand.”
Factors contributing to oil’s rise also include a weaker dollar and larger-than-expected U.S. inventory data, making dollar-denominated oil more affordable for international buyers.
Inventory rebounds at Cushing, Oklahoma, the major U.S. storage hub, were noted as well, following a period of nearing operational lows, driven by enhanced pricing that attracted barrels from Texas’ Permian basin and increased Canadian crude flows. Cushing inventories have climbed for eight consecutive weeks, reaching 30.8 million barrels.
