Oil rises as traders focus on navigation developments in the Red Sea

Oil prices experienced a notable surge on Wednesday, following a more than one percent increase in the previous session, driven by concerns over global trade disruptions and heightened geopolitical tensions in the Middle East. The catalyst for this upswing was the recent series of Houthi attacks on ships in the Red Sea.

As of 0137 GMT, Brent crude futures saw a modest increase of six cents, reaching $79.29 per barrel. Simultaneously, US West Texas Intermediate crude recorded $74.11 per barrel, reflecting a 17-cent, or 0.2 percent, uptick.

The geopolitical landscape was further affected on Tuesday when Washington established a task force dedicated to safeguarding trade in the Red Sea. Houthi assaults, backed by Iran, compelled major shipping companies to alter their routes, prompting concerns about ongoing disruptions to global trade.

The Houthi rebels have declared their intention to challenge the US-led naval mission and continue targeting ships in the Red Sea in support of the Hamas movement governing the Gaza Strip.

Approximately 12 percent of global shipping traffic traverses the Red Sea and the Suez Canal. Analysts, however, suggest that the impact on oil supplies has remained limited thus far, as the bulk of Middle East crude is predominantly exported through the Strait of Hormuz.

In addition to these geopolitical developments, the US Department of Energy revealed on Tuesday that the United States had acquired 2.1 million barrels of crude oil for delivery in February. This move brings the total purchases to approximately 11 million barrels, as part of the ongoing effort to replenish the Strategic Petroleum Reserve following last year’s largest-ever sale.

Sources, citing data from the American Petroleum Institute, reported that US crude and fuel inventories unexpectedly increased last week, contrary to analysts’ predictions of a decline in crude inventories according to a Reuters poll.

The official US inventory data from the US Energy Information Administration is scheduled for release at 1530 GMT on Wednesday, shedding further light on the dynamics influencing global oil markets.