Oil climbs to near six-week highs as Middle East conflict threatens key oil transit routes
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This comes after oil settled at a five-week high on July 21.
PHOTO: REUTERS
- Oil prices reached near six-week highs due to rising tensions between the US and Iran and threats from the Iran-backed Houthi militia targeting key Middle Eastern shipping routes.
- The conflict risks disrupting the Strait of Hormuz and Bab el-Mandeb straits, vital for global oil exports, causing tankers to divert and increasing pressure on Saudi crude supply.
- US crude and distillate inventories showed increases last week, while gasoline stocks fell, ahead of official data, amid ongoing concerns about global energy supply disruptions.
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NEW YORK – Oil prices rose to near six-week highs on July 22 on mounting concerns about disruptions to key Middle Eastern supply routes because of escalating hostilities between the US and Iran and threats to shipping by the Iran-backed Houthi militia in Yemen.
Brent crude futures rose US$2.84, or 3.12 per cent, to US$93.85 a barrel at 0833 GMT (4.33pm Singapore time).
US West Texas Intermediate crude climbed US$2.93, or 3.47 per cent, to US$87.27. Both benchmarks touched their highest levels since June 11.
The US military said late on July 21, early on July 22 in Iran, that it had carried out an 11th consecutive night of attacks.
The US attacks came a short while after the Kuwaiti army said its air defences were intercepting Iranian drones on July 22.
The renewed conflict over control of the Strait of Hormuz is occurring amid increasing fears of further disruptions to global energy supplies after the Iran-aligned Houthis opened a new front in the war by threatening to target vessels carrying Saudi oil in the Bab el-Mandeb strait and announcing a naval blockade of Saudi Arabia.
“The energy market now has the dual-strait worry, with the Bab el-Mandeb Strait looking like it could join the Strait of Hormuz as a hot spot, as traders closely watch shipping numbers in the Red Sea,” said Tim Waterer, chief market analyst at KCM Trade.
The Bab el-Mandeb waterway at the southern entrance to the Red Sea has become an increasingly important route for Saudi crude exports as traffic through the Strait of Hormuz has fallen sharply since a ceasefire between the US and Iran collapsed earlier in July.
Three oil tankers loaded with Saudi crude for China and India made U-turns in the Red Sea on July 21, heading towards the Suez Canal rather than braving the Yemeni coast following the warning from the Houthis.
“The (Houthi) threat has led tankers to divert, which could further pressure the physical market and Saudi exports, contributing to push prices to the upside,” said Frank Walbaum, market analyst at trading platform Naga.com.
In response to the Houthi warnings, Asian refiners are seeking to ship crude oil from Saudi Arabia’s Red Sea port of Yanbu through the Suez Canal and around Africa.
While global oil stockpiles have drawn amid the conflict, the latest US data is showing some building of inventories.
Data from the American Petroleum Institute showed that US crude and distillate inventories rose last week, while gasoline stockpiles fell, market sources said.
The inventory data comes ahead of official figures from the US Energy Information Administration on July 22. REUTERS