Oil Prices Fall As Traders Monitor Red Sea Situation Amidst Record US Crude Production

Oil prices dropped on January 02 as the traders monitored the growing tensions in the Red Sea amid a path-breaking US crude production and worries regarding the demands in China. The West Texas Intermediate deal for Feb lost 1.77%, or $1.27, to settle at $70.38 per barrel. The Brent deal for March 2023 shed 1.49%, or $1.15, to trade at about $75.89.

Crude prices had jumped over 2% earlier in the trading session on rising tensions in the waters of the Red Sea, a critical worldwide trade chokepoint. Helima Croft, the head of global commodity strategy with RBC Capital Markets, stated oil prices don’t reflect the rise in tensions because traders aren’t convinced that a significant supply disruption is on the horizon.

The market is saying that it will wait and watch until something happens, Croft mentioned. But it is getting more serious each day, she spoke of the tensions in the area. Traders are focused more on the macroeconomic backdrop of US production and faltering demands in China, mentioned Adi Imsirovic, a veteran oil trader who’s now an energy security specialist with the Center for Strategic and International Studies.

The Danish shipping major Maersk said on January 02 that it would pause shipping via the Red Sea until further notice after one of the firm’s vessels came under attack by the militants over the weekend. Iran, on January 01, deployed a destroyer to the Red Sea, per the nation’s Tansim news agency. The report has not elaborated on the details of the battleship’s mission but said that Ayatollah Ali Khamenei, the Supreme Leader, stressed the need to maintain its presence in international waters.

The action by Tehran comes after the US Navy helicopters impaired three boats of Houthi rebels. The Navy had been responding to a distress call by a vessel, Maersk Hangzhou (flying the flag of Singapore), that had come under Houthi fire, the US Central Command stated in one of the statements.

Reference: jpt.spe.org

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Source: Maritime Shipping News