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Crude oil prices began the week with a 1% gain in mid-morning trade in Asia as the latest news about Red Sea ship attacks sparked concern about the security of oil shipments.
At the same time winter weather in Russia has affected oil exports negatively, adding to oil’s upwards potential, Reuters reported today, citing an IG analyst.
Russia suspended more than 60% of Urals loadings because of a storm and scheduled maintenance on Friday, the report said.
Meanwhile, four of the world’s largest shipping lines announced the suspension of travel through the Red Sea amid a string of attacks by Yemeni’s Houthis and, most recently, Somali pirates. Maersk Tankers, Moller-Maersk, Hapag-Lloyd, and MSC all said their vessels would be avoiding the Suez Canal until the security situation improves. The most recent addition to this group was French CMA CGM.
It is unclear as of yet whether the ship attacks in the Red Sea would have a lasting impact on oil prices, however. For now, traders appear to be focused more on supply and U.S. record production contributing to this supply.
“The key focus remains on supply, with US crude production hitting fresh records into the end of the year,” Robert Rennie, head of commodity and carbon research at Westpac Banking Corp., told Bloomberg. “It’s uncertain if increased tensions in the Red Sea will have a material influence on oil prices, although the cost of logistics and shipping will rise.”
Support for oil prices could also be found in the weaker greenback, which tends to boost demand as it makes oil more affordable. Last week’s Fed meeting also added fuel to the price recovery as it suggested a soft landing awaits the U.S. economy with no more rate hikes on the horizon.
Still, the oil futures prices remain in contango until the middle of next year, Bloomberg noted in its report, adding the Brent six-month spread stood at $0.21 per barrel. That compared to a backwardation of $1 per barrel of Brent a month ago.
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.