Oil prices experienced a significant surge on Friday, triggered by the U.S.-led air strikes against Houthi rebel targets in Yemen. These strikes were in response to the persistent attacks on ships in the Red Sea, sparking concerns about potential disruptions in oil supply.
Price Movements
- West Texas Intermediate crude (WTI) for February delivery witnessed an impressive increase of $3, or 4.2%, reaching $75.05 per barrel. Previously, it closed at $72.02 per barrel, reflecting a 0.9% increase.
- March Brent crude, the global benchmark, rose by an impressive $3.12, or 4%, to $80.51 per barrel on ICE Futures Europe. This followed a 0.8% rise to $77.41 per barrel on Thursday.
- February gasoline climbed by 2.5%, reaching $2.16 per gallon, while February heating oil saw a 3% increase to $2.75 per gallon.
- Natural gas for February rose by 1.9% to $3.15 per million British thermal units.
Market Drivers
To combat the ongoing attacks on ships in the Red Sea carried out by Iranian-backed Houthis, U.S. and British forces launched joint strikes on more than a dozen targets in Yemen. The objective behind these strikes was to discourage further attacks and maintain stability in the region.
The Growing Threat to Red Sea Shipping Vessels
Houthi rebels have recently intensified their attacks on Red Sea shipping vessels, launching the largest onslaught of missiles and drones to date. This alarming development is a result of the ongoing conflict between Israel and Gaza, which began last year. It is crucial to note that the Red Sea serves as a vital link connecting the Middle East and Asia to Europe through the Suez Canal and the narrow Bab el-Mandeb Strait. This strategic route sees around $1 trillion worth of goods passing through each year.
The impact of these attacks on global oil supply chains should not be underestimated. As one of the most critical oil supply channels to the West comes under threat, the price of crude oil has already started to rise. According to Ricardo Evangelista, a senior analyst at ActivTrades, this dynamic could lead to further price increases if tensions in the Middle East continue to escalate.
The continuous targeting of ships by the Houthis has resulted in vessels having to take detours through alternative waterways, such as the Cape of Good Hope in South Africa. However, this diversion significantly prolongs travel times and entails higher costs. As a result, concerns about disruptions to global supply chains have been growing steadily.
In response to the recent strikes, Mohammed Abdul-Salam, the Houthis’ chief negotiator and spokesperson, dismissed the deterrent effect intended by the United States and Britain. He stated that they were mistaken if they believed that Yemen would cease supporting Palestine and Gaza. Abdul-Salam further emphasized that Houthi targeting would persist and continue to affect both Israeli ships and those heading to the ports of occupied Palestine.
Commodities Corner: The Long Road to U.S. Oil Independence Revealed
In other news related to oil production, there have been notable advancements on the road to U.S. oil independence. The record levels of crude production achieved in recent months serve as a testament to the ongoing efforts in this domain. The journey towards oil independence is a complex and challenging one, but these achievements offer a glimpse of what lies ahead.
Investors Await U.S. Economic Updates
Key Details:
- Producer prices for December to be released at 8:30 a.m. Eastern
Investors are eagerly anticipating further economic updates from the United States. Of particular interest is the release of producer prices for December, scheduled to be announced at 8:30 a.m. Eastern. Stay tuned for the latest updates.
