Oil Hits Two-Week High as Red Sea Attacks Stoke Shipping Fears

(Bloomberg) -- Oil rose to the highest price in more than two weeks as companies increasingly steer clear of the Red Sea amid a spike in vessel attacks along the key shipping conduit.

West Texas Intermediate’s more active February contract advanced 1.5% to settle near $74 a barrel after BP Plc and Equinor ASA said they would pause all shipments through the waterway. The recent escalation in attacks by Iran-backed Houthi rebels in Yemen has bolstered a rebound in oil prices that had slumped to a five-month low last week amid signs of rising production.

Despite the current rally, some traders don’t anticipate long-term price impacts for crude, and timespreads — a critical barometer for supply and demand — continue to indicate weakness. WTI’s prompt spread, the difference between its January and February contracts, settled at 50 cents in contango, signaling an abundance of barrels available in the near term.

“The longer-term impact on oil prices of Houthis attacks on oil tankers through the red sea is a complicated one,” said Fawad Razaqzada, a market analyst at City Index and Forex.com. While the oil price gains are justified, it’s “very difficult to say how long the gains will last for or how much higher will prices go from here on, just on the back of this factor alone.”

The most tangible disruption to energy flows since the Israel-Hamas war led the US to announce a new maritime task force to protect commercial vessels. About 8% of the world’s crude transits through the Suez Canal, putting pressure on tanker utilization if ships are forced to take the longer route around South Africa, Jefferies analysts said in a note.

Disruption to major trading conduits tend to be short term, and it’s likely the US will take firmer military actions to counter these tensions, said John Driscoll, director and founder of Singapore-based consultant JTD Energy Services Pte Ltd. 

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