Oil prices decrease by 3% as shipping disruptions in the Red Sea subside
As more shipping firms declared they were prepared to travel the Red Sea route, worries about supply disruptions as long as Middle Eastern tensions remain high were allayed, and oil prices fell 3% on Thursday.
The more active March delivery of Brent crude futures ended up $2.39, or 3%, at $77.15. After settlement, Brent futures for February delivery fell 1.3% to $78.39 a barrel.
At $71.77 per barrel, U.S. West Texas Intermediate crude futures saw a $2.34, or 3.2%, decline. Oil prices fell by almost 2% on Wednesday as big shipping companies started going back to the Red Sea.
According to a Reuters analysis of the group’s itinerary on Thursday, Denmark’s Maersk (MAERSKb.CO) will route nearly all container vessels sailing between Asia and Europe through the Suez Canal going forward, and only a small number will divert around Africa.
Before this week, France’s CMA CGM announced that it is also sending more ships through the Suez Canal.
“The perception is that the Red Sea route is reopening and will bring supply to market weeks faster,” Price Futures Group analyst Phil Flynn said.
Following the Houthi militant group’s start of targeting vessels in Yemen earlier this month, major shipping companies ceased using the Suez Canal and Red Sea routes.
Price reductions were temporarily restrained after the U.S. Energy Information Administration revealed last week that crude oil inventories had been drawn down significantly more than anticipated.
Subsequently, prices dropped even more, probably as a result of traders’ attention being drawn to the U.S. Gulf Coast region, where refiners are rushing to empty their inventories in order to avoid paying hefty storage taxes at the end of the year, according to UBS analyst Giovanni Staunovo.