Oil prices rose on Monday after a drone strike on US forces in Jordan added to concerns about supply disruption in the Middle East, as Houthi rebels launched attacks on ships in the Red Sea and hit a fuel tanker operated by Trafigura.
The risk of an expansion of conflict emerged as Russia’s exports of refined products began to decline and many refineries were put under repair following drone attacks.
Brent crude futures were up 29 cents, or 0.4%, at $83.84 a barrel by 0230 GMT, after reaching a session high of $84.80. WTI crude oil rose 34 cents, or 0.4%, to $78.35 a barrel, after reaching an intraday high of $79.29 earlier in the session.
A drone attack on US soldiers in Jordan has raised concerns about a broader conflict in the Middle East, a region important for oil wealth.
The attack in Jordan, which killed three US soldiers, marked a critical turning point in the ongoing conflict in the Middle East and raised the prospect of a more significant US intervention in the war. A more direct conflict with Iran would increase the likelihood of disruption in regional energy supplies.
Trafigura said in a statement on Saturday that it was assessing the security risks of future voyages in the Red Sea after the fire on its tanker, which was hit by a missile off the coast of Yemen, was extinguished. Until this incident, supply disruptions had been limited, but the situation changed after the tanker was hit by a missile on Friday.
With US and UK-bound oil tankers currently under threat of attack, the market will likely re-price the risk of disruption.
Both contracts rose for a second week on Friday, hitting the highest level in almost two months, boosted by supply concerns in the Middle East and Russia, while positive U.S. economic growth and signs of stimulus from China boosted demand expectations. The atmosphere of complacency that prevailed in the oil market has evaporated accordingly.
According to data, Russia will reduce its exports of naphtha, a petrochemical raw material, by about 127,500 – 136,000 barrels per day, or about a third of its total exports, after fires disrupted refineries in the Baltic and Black Seas.
On February 1, top ministers of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, will meet online.
However, OPEC+ sources stated that the meeting will take place too early for further production policy decisions, and said that OPEC+ will probably decide on oil production levels for April and beyond in the coming weeks.