International Oil Prices Fluctuate Amid Red Sea Attacks... Strong for Three Consecutive Days

International oil prices continued to rise for the third consecutive day amid concerns over supply disruptions caused by geopolitical risks in the Red Sea, a key global trade route. The paralysis of the Red Sea route has led global shipping companies and oil firms to halt their procurement routes, fueling expectations of inevitable energy supply disruptions.

On the 20th (local time), February delivery West Texas Intermediate (WTI) crude oil prices closed at $74.22 per barrel on the New York Mercantile Exchange (NYMEX), up 28 cents (0.38%) from the previous day. WTI prices have surged 3.91% over the past three trading days. Investor sentiment toward crude oil is at its highest level since late November.

As indiscriminate attacks on civilian vessels in the Red Sea, which connects the Mediterranean and the Indian Ocean via the Suez Canal, have intensified, major global shipping companies such as Denmark's Maersk, Switzerland's MSC, France's CMA CGM, and Germany's Hapag-Lloyd, along with oil companies, have decided to suspend navigation through the Red Sea or choose alternative routes, causing ongoing logistical disruptions.

The Norwegian tanker 'Strinda' was attacked by a missile from Yemen's Houthi rebels on the 11th (local time), the U.S. Central Command announced. The Central Command explained that the tanker sent a distress call, and the naval destroyer USS Mason provided support. The photo shows the USS Mason sailing in the Atlantic in 2008. [Image source=AFP Yonhap News]

British Petroleum (BP), the largest oil company in the UK, temporarily suspended operations on the Red Sea route on the 18th. Switzerland's MSC, France's CMA CGM, and Germany's Hapag-Lloyd announced they would take detours around the African continent until safety is ensured. In a statement, BP said, "Due to the deteriorating security situation in the Red Sea route, we have decided to temporarily suspend all transportation passing through the Red Sea route."

With disruptions in crude oil transportation, the prevailing view is that oil prices will face upward pressure in the short term. The Houthi group declared on the same day that they would retaliate if attacked by the U.S. military, signaling the possibility of a larger military conflict. The Houthis' stance came amid the U.S. deploying an aircraft carrier strike group near the Red Sea and pushing for the establishment of a multinational naval fleet. A U.S. Navy spokesperson announced that the aircraft carrier USS Dwight D. Eisenhower had entered the Gulf of Aden near Yemen on the same day.

Some warn that military clashes in the Bab el-Mandeb Strait could trigger energy supply disruptions similar to the blockade of the Strait of Hormuz during the Iran-Iraq War.

However, there is also analysis suggesting that military threats in the Red Sea region may not fully drive commodity prices into a sustained upward trend. Caroline Bain, an analyst at Capital Economics, said, "Trade disruptions in the Red Sea region are not expected to trigger a strong rally in commodity prices," adding, "This is because crude oil production is still unaffected." She assessed, "Crude oil will eventually be delivered to its destination, and it will only take a bit more time or cost a bit more for transportation."

Meanwhile, according to the U.S. Energy Information Administration (EIA) and Dow Jones, crude oil inventories for the week ending on the 20th increased by 2.909 million barrels from the previous week to 443.682 million barrels. According to data compiled by The Wall Street Journal (WSJ), experts had expected a decrease of 2.5 million barrels. Gasoline inventories rose by 2.71 million barrels to 226.723 million barrels, and diesel and heating oil inventories increased by 1.485 million barrels to 115.024 million barrels.

Experts had predicted gasoline inventories to increase by 700,000 barrels and diesel and heating oil inventories to rise by 700,000 barrels as well. Last week, the U.S. refinery utilization rate rose to 92.4%, up from 90.2% the previous week. Wall Street experts had expected 90.4%.