SINGAPORE: Oil prices rose as much as 1% on Friday as tensions persisted in the Middle East following Houthi attacks on ships in the Red Sea, although Angola’s decision to leave OPEC raised questions over the group’s effectiveness in supporting prices.
Brent crude futures were up 70 cents, or 0.9%, to $80.09 a barrel by 0700 GMT, while U.S. West Texas Intermediate crude futures were up 66 cents, or 0.9%, at $74.55 a barrel.
Both of the contracts have risen for a second week, each up over 4%, as the shipping concerns buoyed prices.
Rising geopolitical risks due to the Red Sea attack disruptions are supporting the current bullish tone in oil prices, said Kelvin Wong, senior market analyst at OANDA.
More maritime carriers are avoiding the Red Sea due to vessel attacks carried out by the Houthi militant group in Yemen in support of the Palestinians fighting in Gaza against Israel that have caused global trade disruptions through the Suez Canal, which handles about 12% of worldwide trade.
Germany’s Hapag-Lloyd and Hong Kong’s OOCL were the latest companies to say they would avoid the Red Sea by rerouting ships or suspending sailing.
The U.S. on Tuesday launched a multinational operation to safeguard commerce in the Red Sea, but the Houthis said they would continue to carry on attacks.
Analysts say the impact on oil supply so far has been limited, as the bulk of Middle East crude is exported via the Strait of Hormuz.
However, oil prices could see a rebound “due to the geopolitical conflicts and the imminent implementation of OPEC’s production cuts,” said Leon Li, an analyst at CMC Markets in Shanghai, referring to the Organization of the Petroleum Exporting Countries.
“So a small supply gap is likely to occur in January next year, and WTI crude oil may rise to $75-$80 per barrel,” he said.
Saudi Arabia, Russia and other members of OPEC+, who pump more than 40% of the world’s oil, agreed to voluntary output cuts totalling about 2.2 million barrels per day (bpd) for the first quarter of 2024.
The Saudi-led producer group in recent months had been rallying support to deepen output cuts and boost oil prices, but Anglola said on Thursday it would leave OPEC, as its membership was not serving its interests.
Angola had previously protested a decision by the wider OPEC+ group to reduce the country’s oil output quota for 2024. – Reuters
Source: The Star