Oil futures: Crude rallies as energy majors avoid Red Sea transit
Quantum Commodity Intelligence – Crude oil futures Monday were higher as more vessel operators announced they would avoid the Red Sea for transit following a spate of tanker attacks, including at least two oil giants.
Front-month Feb24 ICE Brent futures were trading at $77.89/b (1925 GMT), compared to the day's high of $79.51/b Friday's settle of $76.55/b.
At the same time, Jan24 NYMEX WTI was trading $72.46/b, versus Friday's settle of $71.43/b, while the more-liquid Feb24 contract was trading $72.82/b against the previous settle of $71.78/b.
Both BP and Equinor said Monday they would pause oil tanker shipments via the Red Sea while other oil firms were reviewing policies.
Should the re-routing become more widespread, it could add considerable voyage time to tankers reliant on the transit route. The US Energy Information Administration (EIA) said earlier this month that the Suez Canal, along with the parallel Sumed pipeline, has seen oil flows soar by 80% in under two years, up from 5.1 million bpd in 2021 to 9.2 million bpd in 1H 2023.
Likewise, the Bab-el-Mandeb Strait, a narrow body of water separating the Red Sea from the Gulf of Aden/Arabian Sea, has seen volumes ramp up from 4.9 million bpd in 2021 to 8.8 million bpd in the first half of this year.
On Friday, two of the world's largest shipping companies halted voyages through the Red Sea after the spate of attacks by Houthi forces, with the move set to push freight rates and journey times up as commercial shipping seeks to avoid the increasingly precarious route.
Maersk said Friday it had advised all its vessels to avoid the Red Sea until further notice, while a Hapag-Lloyd employee said that its cargoes in the area had been told to stop pending further instruction.
Global oil markets also extended the gains as adverse weather conditions and engineering works disrupted loadings from Russia's two main export routes, likely bringing further delays to a December slate that had already been hit by storms.
Loadings at the Baltic port of Primorsk have been suspended from 13-18 December by repair work, hitting diesel loading through December, along with Urals crude that is also shipped out of the port.
Russia's Deputy Prime Minister Alexander Novak said Sunday 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.
Goldman
However, it hadn't been all one-way news as the usually bullish Goldman Sachs trimmed its 2024 Brent outlook by $10/b to $70-$90/b, arguing increased US production will help offset further OPEC+ cuts.
"We still look for range-bound prices and only moderate price volatility in 2024. Elevated spare capacity to handle tightening shocks should limit upside price moves," said the bank.
Meanwhile, weak economic data from Germany, Europe's biggest economy, and a slowdown in China's refinery throughputs also weighed on sentiment, while the outlook for the 2024 global economy remains mixed.
"As we head into 2024, we are downbeat on the prospects for global GDP growth. In our view, the global economy is likely to experience a period of below-trend growth in 2024, with the global economy expanding just 2.4%," said Wells Fargo in its bearish outlook for next year.
In China, diesel output sank 6% month on month to 17.65 million mt or 4.38 million bpd last month, down more than 7% year on year, the latest data from China's National Bureau of Statistics showed Monday.
