Oil prices jump 1% as traders get uneasy due to Red Sea shipping issues

 Oil prices jump 1% as traders get uneasy due to Red Sea shipping issues

On Tuesday, the US announced the creation of a task force to defend Red Sea trade against terrorist assaults by Iran-backed groups in Yemen. The Houthis have promised to continue hitting Israeli targets in the region and to oppose the US-led naval campaign.

At $79.23 a barrel, Brent oil futures saw a $1.28, or 1.6%, increase, marking the highest level since December 1.

On December 19, oil prices increased by more than a dollar per barrel as a result of assaults on ships in the Red Sea by Houthi terrorists from Yemen who are associated with Iran, disrupting maritime commerce and forcing more firms to reroute ships. It was inevitable, which made the preceding session's lead stronger.

At $79.23 a barrel, Brent oil futures saw a $1.28, or 1.6%, increase, marking the highest level since December 1. The January delivery of U.S. West Texas Intermediate oil futures, which expire after Tuesday's settlement, closed 97 cents, or 1.3 percent, higher. at the highest price point in the last two weeks, $73.44 a barrel.

On December 19, the United States announced the creation of a task force to protect trade in the Red Sea against assaults by terrorists in Yemen who are supported by Iran. The Houthis have promised to continue hitting Israeli targets in the region and to oppose the US-led naval campaign.

The market is uneasy since it is unclear how long this will endure, according to Fiona Cincotta, senior analyst at City Index. "Major shipping companies are still taking an evasive stance despite the launch of operations to ensure safe passage through the Red Sea" .

On December 18, after an assault on a ship owned by Norway and BP's announcement that it was stopping all transit in the Red Sea, oil prices increased by about two percent. Similar statements have now been made by a number of other shippers.

Approximately 12% of global maritime traffic traverses the Red Sea and the Suez Canal.

According to Rob Thammel, managing director of Kansas-based energy investment company Tortoise Capital, "events in the Red Sea are increasing geopolitical risks." "This is pushing oil prices higher as traders assess the possibility of supply disruptions due to rising geopolitical risks," Thammel said.

Some experts said that although assaults on ships have raised risk premiums, the effect on oil supply is now minimal.

According to Giovanni Stanovo, an analyst at UBS, "the impact is limited for now as oil continues to flow, with transportation costs rising due to longer journeys."

The interruption, according to Goldman Sachs analysts, is unlikely to have a significant effect on the price of crude oil and LNG since there are options for ships to be rerouted, which should not directly influence output.

This week's emphasis is also on the most recent picture of US supplies. US crude oil and gasoline inventories increased, according to the first of the American Petroleum Institute's two weekly supply reports, according to sources.

US crude oil stocks are predicted by analysts surveyed by Reuters to have decreased last week.

On December 20 at 10:30 am ET, the US Energy Information Administration (EIA) will release official US stock statistics.