Oil Rises As BP Joins Other In Avoiding Red Sea Transport Route

Meanwhile, banks see gains for crude in 2024 due to high demand: File Image/Pixabay

Jittery oil traders on Monday caused a near 2 percent rise in two key benchmarks upon news that BP suspended all tanker transit in the Red Sea following drone attacks by a Yemeni Houthi militant group on two commercial ships.

The Houthis stated  they have been attacking vessels in the region with links to Israel in retaliation for its war with Hamas in Gaza.

This came in the wake of other shipping firms over the weekend vowing to avoid the route, as well as London's marine insurance market on Monday widening the area in the Red Sea considered high risk, thus boosting premiums.

Brent settled up $1.40, or 1.8 percent, to $77.95 per barrel, while West Texas Intermediate settled up $1.04, or 1.5 percent, to $72.47.

Rebecca Babin, a senior energy trader at CIBC Private Wealth, addressed some of the implications of the Red Sea attacks: she said, “Approximately 8 to 10 percent of global crude flows through the Red Sea — most to Russia, India, and China — which on a face value is not insignificant.”

But she added that traders realize “crude oil is currently well supplied, and crude oil inventories have recovered from summer draws, thus mitigating the impact of a supply disruption.”

Despite the price rises of the past few sessions, crude has still shed over 20 percent from a high achieved in September and down almost 10 percent for the year; in addition, timespreads between monthly contracts, a barometer for supply and demand, continue to indicate weakness (WTI’s prompt spread is currently 36 cents in contango).

Meanwhile, oil made other headlines on Monday with top U.S. banks predicting a median Brent price of $85 for 2024 due to demand growth (especially from Asia) and potential supply disruptions.

Also on Monday, Tesla CEO Elon Musk told a summit organized by Italian prime minister Giorgia Meloni that the public should stop “demonizing" fossil fuels because while climate change is “still a concern in the long term but I think it’s exaggerated in the short term.”

Musk called for gradual carbon emission reductions and that current policymakers are “running a climate experiment which is dangerous.”