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Peter Davis

An writer at FOMOdrive

  • Dec 19, 2023
  • 2 min read

Oil jumped on news from the Red Sea

On Monday, oil prices rose by over $3 from their lowest point of the day.

The Red Sea has been the target of an attack by Yemen's Houthi forces. Merchant ships have been affected by this assault.

Due to this, transport firms have ceased to utilize the Suez Canal, a major international trade route.

Experts do not anticipate an increase in oil prices any further.

Goldman Sachs reduced its prediction for the price of Brent oil in 2024 by $10.

On Monday, Brent oil prices rose to nearly $80 per barrel, and Russian Urals quotes exceeded $66. This 8-10% increase in less than four days is attributed to the regular attacks by the Houthis on merchant ships in the Red Sea and the Federal Reserve's more relaxed rhetoric, according to Kommersant.

A.P. Moeller-Maersk A/S and Hapag-Lloyd have both declared the suspension of their ships' passage through the Red Sea in reaction to the Houthi attacks.

BBC News reports that four of the world's biggest shipping companies have decided to either halt their ships' passage through the Suez Canal or reroute them away from the Red Sea due to the risk of attacks by Yemen's Houthis.

Ansar Allah, a Yemeni group, declared on November 14th that they would be launching missile and drone strikes on any commercial ships related to Israel in the Red Sea and the Bab el-Mandeb Strait. They stated that they would not permit these vessels to pass through the waters.

The Suez Canal-Red Sea-Bab el-Mandeb Strait route is one of the most significant in the world for the transportation of maritime cargo, such as oil and fuel from the Persian Gulf to the Mediterranean, and various goods from Asia to Europe, as reported by Reuters.

Analysts have warned that if the Suez Canal is shut down or its capacity is significantly reduced, it will have serious repercussions for the international oil market.

Market participants do not anticipate a significant increase in oil prices, as geopolitical disputes (unless they escalate into a full-scale war) only provide temporary support for oil prices. In the long run, the price is determined by global demand, which is contingent on the condition of the global economy.

Goldman Sachs has revised its forecast for Brent oil prices in 2024, reducing the expected range from $80 to $100 to $70 to $90. This is due to the anticipated increase in production in the United States.

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