Oil prices rose on Monday as traders monitored risks of supply disruptions in the Middle East following attacks by US and British forces to prevent Yemen’s Houthi militia from attacking ships in the Red Sea.
Brent crude futures were up 1.1% on Friday, rising 13 cents, or 0.2%, to $78.42 a barrel at 04:05 GMT. West Texas Intermediate (WTI) crude rose 5 cents, or 0.1%, to $72.73 a barrel, following a nearly 1% gain in the previous session.
Benchmark indexes rose more than 2 percent last week to their highest intraday levels this year after US and British forces launched dozens of airstrikes on Houthi forces in response to attacks by Iranian-backed Houthi fighters on ships trading with Israel in the Red Sea.
There are supply risks in the market, given the tension in the Red Sea. However, for now, there is no impact on oil supply.
Following the attacks, many tanker owners removed their ships from the Red Sea on Friday. But traders are still monitoring Iran’s response and its impact on shipments in the Strait of Hormuz, the world’s most important oil choke point.
Since the Middle East conflict does not currently impact oil production, the geopolitical risk premium priced into oil prices appears modest based on the implied volatility of options.
Although unlikely to occur, oil prices are estimated to rise 20% in the first month of a possible disruption in the Strait of Hormuz and could temporarily double in the less likely prolonged disruption.
People protesting perceived corruption in Libya have threatened to close two more oil and gas facilities after shutting down the 300,000 barrel-per-day Sharara field on January 7.
U.S. energy and natural gas companies were preparing for extreme cold this weekend, which is expected to lead to record gas demand due to today’s Martin Luther King Day holiday and also cut off supply.
The Texas power grid operator issued an appeal to the public on Sunday urging them to save energy.
