Oil Gains As BP Joins Shippers Avoiding Red Sea’s Rising Attacks

(Bloomberg) -- Oil rose to the highest in two weeks as more oil companies and tanker owners began to avoid the Red Sea amid increasingly frequent attacks in the region. 

West Texas Intermediate advanced 1.5% to settle above $72 a barrel at the highest since Dec. 4. Prices earlier spiked as much as 4%. BP Plc said it will pause all shipments through the Red Sea, while Equinor ASA is diverting vessels away from the region. Euronav NV, a major shipowner, is also keeping its ships clear, citing safety concerns.

The firms’ actions on Monday followed similar moves by container liners. A company that provides ship management and thousands of crew members to vessels was also asking shipowners to consider alternative routes.

Read More: Houthi Attacks Start Shutting Down Red Sea Merchant Shipping

“Approximately 8% to 10% of global crude flows through the Red Sea — most to Russia India, and China — which on a face value is not insignificant,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. But traders are facing the reality that “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 geopolitical risks, crude has still dropped more than 20% from its late-September high and is down almost 10% for the year amid rising US shale supply and skepticism over promised OPEC+ output cuts. A shifting outlook for Fed rate policy has swung prices in recent days, with officials’ commentary recently dissuading bets on aggressive cuts next year.

The timespreads between monthly contracts, a critical barometer for supply and demand, continue to indicate weakness. West Texas Intermediate’s prompt spread is trading at 36 cents in contango, hovering at the widest discount for near-term barrels compared to barrels to delivered later, since February.

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