DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange settled Monday's session with gains between 1.5% and 2% triggered by a disruption in shipping at the Red Sea following a series of attacks by Iranian-aligned Houthi forces on commercial vessels in the region.

Some 8.8 million barrels (bbl) of crude oil transits each day through the Strait of Bab-el-Mandeb in the Red Sea, a narrow water passage between the Arabian Peninsula and the Horn of Africa. According to the U.S. Energy Information Administration, the amount of oil moved through the waterway chokepoint is up from 4.9 million barrels per day (bpd) seen just two years ago as more Russian oil was rerouted from the European continent towards Asia in the aftermath of Moscow's invasion of Ukraine. Similarly, 4.4 million bpd of petroleum products, including gasoline, diesel and jet fuel, were shipped during the first half of 2023 via the same chokepoint from Asian and Middle Eastern refiners towards Europe and North America. Given the key role the shipping routes on the Red Sea play in the global oil trade, the recent attacks on commercial vessels by the Houthi rebel group are particularly troublesome for traders.

Oil giant British Petroleum said on Monday the company halted all oil transit through the Red Sea as it continued to assess security for its vessels. Tanker firms Moller-Maersk, Hapag-Lloyd, and Euronav have also stopped their ships from entering the southern tip of the Red Sea after a recent spike in violence against commercial shipping.

U.S. and European officials are reportedly working on a multifaced security force in the Red Sea to escort all vessels passing through the waterway. Iran-allied Houthi fighters claim they are only attacking ships linked to Israel as part of their strategic shift towards maritime operations to put a stop to the war in Gaza.

Further spurring gains for the oil complex, Russia's Deputy Prime Minister Alexander Novak said on Dec. 17 that it would deepen oil export cuts in December by potentially 50,000 bpd or more than previously pledged, although it was unclear if this was a result of the disruptions. Regardless of the outcome for Russian exports, the disruption will surely increase shipping costs and voyage time for all tankers and container vessels.

At settlement, NYMEX West Texas Intermediate (WTI) futures for January delivery added $1.04 bbl to $72.47 bbl, and international crude benchmark Brent February futures advanced to $77.95 bbl, up $1.40. NYMEX RBOB January futures rallied $0.0220 to $2.1590 gallon, and NYMEX ULSD January contract advanced $0.0520 to $2.6728 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com.