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Crude oil rose on Tuesday following the latest strike by Yemen’s Houthis on a container ship in the Red Sea and retained the gain when trade began today as well.
Yesterday, crude oil booked its biggest gain in over a week, according to Bloomberg, following the news that the Houthis had struck a container vessel owned by MSC and bound for Pakistan, traveling from Saudi Arabia.
The attack took place despite the increased military presence of U.S and UK forces in the area, after the U.S. announced Operation Prosperity Guardian last week. Several other countries including France, Italy, Spain, Norway, and Denmark pulled out of the coalition saying they would not serve under U.S. command but only under NATO command.
Even with this heightened U.S. and UK presence in the Red Sea, MSC said it will continue rerouting its ships that were previously scheduled to pass through the Suez Canal to the Cape of Good Hope in South Africa.
Meanwhile, Brent topped $80 per barrel, hitting $81 on Tuesday, while WTI remained around $75 per barrel earlier today. At the time of writing, the benchmarks were trending slightly down. That’s evidence that despite the potential for supply disruption, sentiment on the market appears to be still focused on the balance between supply and demand, leaning towards weaknesses in the latter.
"Despite shutting down shipping channels and re-routing vessels, how far the global supplies are impacted is still debatable," Phillip Nova senior analyst Priyanka Sachdeva told Reuters.
Speaking to Bloomberg, however, Sachdeva said that “Persistent conflict in the Red Sea is propelling a rally. “Thin market depth — owing to the holiday season — is adding further to complexities.”
Bloomberg noted in its report that oil prices remain on track to post their first annual decline for the last three years despite the most recent rebound.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.