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Oil Prices Shed 2% As Shippers Gamble on Red Sea

West Texas Intermediate (WTI) crude oil prices are down over 2% on Wednesday, with Brent crude closing in on similar losses on the day as global shipping giants gear up to resume traversing the Red Sea despite an ongoing Houthi missile barrage. 

At 3:43 p.m. ET on Wednesday, WTI was trading down 2.02% at $74.04. Brent crude was trading down 1.86% at $79.56. 

Oil prices have continued to track downwards on faith that a U.S.-led international task force, dubbed Prosperity Guardian, will be able to protect merchant vessels from Houthi targeting in the Red Sea, on the way to the Suez Canal. 

Earlier on Wednesday, Danish shipping giant Maersk confirmed it had scheduled dozens of vessels for the Suez Canal, via the Red Sea, in the coming weeks after a temporary halt. The Houthis are targeting merchant vessels going through the Bab al-Mandab Strait between Djibouti and Yemen. 

U.S. Central Naval Command has released data showing a minimum of 15 commercial ships attached by the Houthis in November and December, with the most recent attack on Tuesday, December 26. 

While Maersk and others are resuming shipping in the Red Sea, using evasive maneuver, Germany’s Hapag-Lloyd said on Wednesday that it would not be following suit, deeming the Suez Canal route still too dangerous despite U.S. military protection, the BBC reports. Instead, the shipping giant will reroute vessels via the Cape of Good Hope, which adds 3,500 nautical miles to the trip and a concomitant increase in shipping costs. 

Hapag-Lloyd is the fifth-largest shipping company in the world by capacity. 

Shippers will continue to evaluate the situation, with Maersk also noting that “the overall risk in the area is not eliminated at this stage”. 

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By Charles Kennedy for Oilprice.com

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