Oil prices rise beyond $80 a barrel following Red Sea tanker attacks

Oil prices tipped above $80 per barrel on Friday after shipping firms reduced their traffic through the Red Sea following a series of attacks.

Brent Crude futures were 0.9 per cent up at $80.32 in morning trading, its highest price since the end of November, before dipping back to $79.76 during the early afternoon, according to Morningstar.

Rebels from Yemen’s Houthi movement claimed to have launched numerous assaults in the Bab-al-Mandab Strait over recent weeks on commercial vessels they believe are heading towards Israel.

Consequently, many prominent shipowners have diverted journeys away from the Red Sea, one of the world’s busiest shipping routes, which is directly connected to the Suez Canal.

Both Moller-Maersk and Hapag-Lloyd announced their vessels would instead travel around South Africa’s Cape of Good Hope, costing millions of dollars and adding a potential ten extra days to trips.

Oil tanker groups Euronav and Frontline declared on 18 December that they would avoid the Red Sea, with energy giant BP following a few days afterwards, blaming the ‘deteriorating security situation’.

So far, oil prices and supplies have endured limited impact from the Houthi attacks as most Middle Eastern oil is transported via the Strait of Hormuz.

In addition, a multinational coalition fronted by the United States – called Operation Prosperity Guardian – has been launched to safeguard ships travelling through the Red Sea.

Nonetheless, oil prices could rise significantly higher should the Israel-Hamas war that began on 7 October escalate into a broader regional conflagration.

Oil prices soared considerably in 2022 following the gradual loosening of Covid-related restrictions across the world and Russia’s full-scale invasion of Ukraine.

Brent crude spot prices averaged about $100 per barrel throughout the year, while the comparative figure for West Texas Intermediate was $95.

Though prices have slid back this year, they remain far above pre-pandemic levels, partly due to some oil-producing countries cutting output.

At the end of November, the Organisation of Petroleum Exporting Countries (OPEC) and Russia – a group known as OPEC+ – agreed to reduce production levels by 2.2 million barrels per day in the first quarter of 2024.

On Thursday, Angola announced it was leaving OPEC after clashing with Saudi Arabia over lowering its production baseline.

Analysts do not expect the decision to dramatically affect oil prices, as Angola is responsible for just under 2 per cent of OPEC+’s output, which totalled 43 million barrels per day last month, according to the International Energy Agency.