In the wake of recent attacks by Iran-aligned Yemeni Houthi militants in the Red Sea, global oil markets experienced minimal movement on Wednesday. Investors closely monitored the unfolding situation in the region, leading to cautious trading.
Brent crude futures saw a marginal decrease of 0.1%, amounting to an 8-cent dip, settling at $79.15 per barrel by 0507 GMT. Simultaneously, U.S. West Texas Intermediate crude remained steady at $73.94 per barrel.
Tuesday witnessed a surge of more than 1% in the benchmarks as concerns over potential disruptions to global trade and heightened geopolitical tensions in the Middle East intensified. The Houthi attacks on ships in the Red Sea prompted Washington to launch a task force aimed at securing Red Sea commerce. This move was in response to major shipping companies rerouting their vessels, raising fears of sustained disruptions to global trade.
Market strategist Yeap Jun Rong from IG remarked that the U.S.-led naval mission to counter Houthi attacks had yet to alleviate broader concerns about safe passage through the Red Sea. Major maritime carriers continued to opt for alternative routes amid the ongoing tensions.
Despite the Houthi’s pledge to defy the U.S.-led naval mission and persist in targeting Red Sea shipping in support of Hamas in Gaza, the impact on oil supply remains limited. Approximately 12% of global shipping traffic passes through the Red Sea and the Suez Canal. However, the majority of Middle East crude is exported via the Strait of Hormuz.
On Tuesday, the U.S. Energy Department reported the purchase of 2.1 million barrels of crude for delivery in February, bringing total purchases to around 11 million barrels. This effort is part of the ongoing replenishment of the Strategic Petroleum Reserve (SPR) following the largest sale in history last year.
Contrary to analysts’ expectations of a decline in crude stocks, U.S. crude and fuel inventories rose last week, as reported by sources citing data from the American Petroleum Institute. Official U.S. stocks data from the U.S. Energy Information Administration (EIA) is expected to be released at 10:30 a.m. ET (1530 GMT) on Wednesday.
Looking ahead, S&P Global Commodity Insights highlighted that the U.S. is currently producing more oil than any country in history. This trend is contributing to robust non-OPEC+ supply growth, anticipated to surpass the growing global demand in 2024.
In the fourth quarter, U.S. total liquids production reached 21.4 million barrels per day (bpd), with crude and condensate accounting for 13.3 million bpd. Jim Burkhard, Vice President at S&P Global, emphasized that not only is the United States achieving historic oil production levels, but the volume of oil (crude oil, refined products, and natural gas liquids) being exported is comparable to the total production of Saudi Arabia or Russia.