Oil Prices Stabilize, Reflects Confidence in US Coalition in Red Sea
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Roshan Amiri
- . December 28, 2023
- . Update: December 28, 2023 5:36 pm
After falling by over 2 percent on Wednesday, oil prices have stabilized rising 0.3 percent to $79.85 a barrel amid escalating tensions in the Middle East. Focus is on the Red Sea following shipping disruptions because of Yemen-based Houthi group attacks forcing ships to the Suez Canal.
Hiroyuki Kikukawa, president of NS Trading, said concerns about shipping in the Red Sea have eased. He said continued worries about tensions in the Middle East make it difficult to sell further. “The market is likely to try the upside again, maybe in the early New Year, also on expectations of a recovery in fuel demand thanks to monetary easing in the United States and higher kerosene demand during the winter in northern hemisphere.”
Moreover, Maersk has given vessels green light to resume sailing through the Red Sea. So other shipping companies might follow suit. But Hapag-Lloyd says it’s still too dangerous. The German international shipping company says it would continue to reroute its ships via the Cape of Good Hope.
US-led Task Force in Red Sea
Chris van Moessner, analyst at S&P Global, believes that shipper resuming their route and oil prices settling reflect confidence in the US-led naval force in the Red sea. The US will be successful in overcoming the attacks on shipping by Houthi rebels.
But experts say a prolonged Israeli military campaign in Gaza and the spillover of the war to attacks on ships in the Red Sea drive market sentiment. As such major companies have been diverting their vessels from this route. BP is temporarily halting all shipments of crude through the Red Sea, while Maersk said it will not hesitate to re-evaluate the situation and initiate diversion plans if necessary.
Mohamed Ata, an analyst for the Universal Stock company, said Egypt would be hugely impacted by the tension. “Egypt is grappling with shortages of foreign exchange reserves caused by the impact on the Suez Canal, which serves as one of the main sources of foreign currency. As the most crucial waterway globally, any disruptions in the canal will significantly impact Egypt’s foreign currency earnings.”
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Oil Prices Ease
According to a report, US crude stocks were expected to have fallen by 2.6 million barrels last week, and distillate and gasoline inventories were to have risen. Priyanka Sachdeva, senior market analyst at Philli Nova, said crude prices eased on Wednesday after a whopping rebound in the previous session as investors re-assessed the impact on global supplies. She highlighted that thin market depth was also contributing to price volatility.
“Despite shutting down shipping channels and re-routing vessels, how far the global supplies are impacted is still debatable.”
