Oil prices rise 3% on Middle East tensions, OPEC unity pledge

Red Sea tensions won't de-escalate anytime soon, says Energy Aspects' Amrita Sen

Oil rose more than 3% on Wednesday as the U.S. warned Houthi militants against further attacks in the Red Sea and OPEC pledged to remain united in supporting prices.

Protests in Libya have also shut down the Sharara oil field, which produces 300,000 barrels per day, two engineers told Reuters on Wednesday.

The West Texas Intermediate contract for February gained $2.32, or 3.29%, to settle at $72.70 a barrel. The Brent contract for March added $2.36, or 3.11%, to settle at $78.25 a barrel.

Houthi militants, who are based in Yemen and backed by Iran, claimed Wednesday that they targeted the CMA CGM Tage container ship. French shipping giant CMA CGM told CNBC in a statement that the vessel “did not suffer any incident.”

This comes a day after Danish shipping giant Maersk halted all shipping through the Red Sea until further notice due to repeated Houthi attacks on vessels. German shipping company Hapag-Lloyd confirmed Wednesday that it would continue to avoid the Red Sea.

The U.S. and eleven allies called Wednesday for the Houthis to immediately halt “these illegal attacks,” warning the militants would “bear the responsibility of the consequences should they continue to threaten lives, the global economy, and free flow of commerce in the region’s critical waterways.”

“The United States does not seek conflict with any nation or actor in the Middle East,” National Security Council spokesperson John Kirby told reporters during a White House briefing Wednesday.

“But neither will we shrink from the task of defending ourselves, our interests, our partners, or the free flow of international commerce,” Kirby said.

Oil prices have been volatile this week, with U.S. crude and the global benchmark settling more than 1% lower on Tuesday despite Maersk’s decision to continue avoiding the Red Sea due to attacks by the Houthis.

“We haven’t seen prices react much in part because fundamentals are softer for crude right now,” Amrita Sen, founder and director of research at Energy Aspects, told CNBC on Wednesday. “We’ve seen some inventory builds toward year end and that’s why the market just isn’t sensitive to this.”

“Even if there are attacks we’re not expecting any oil supply losses on the back of it,” Sen said. “The market is going to look for specific supply disruptions that actually helps tighten balances before we see a significant increase in prices.”

OPEC and its allies issued a statement Wednesday pledging to remain united in the group’s “efforts to maintain oil market stability going forward.” Several members of the group pledged in November to cut 2.2 million barrels per day through the first quarter of this year to support prices.

Traders have been skeptical of that pledge because it is voluntary and OPEC has struggled to maintain a united front. The promised voluntary cuts have done little to support prices as the U.S. pumps crude at a record clip and demand weakens in China.

U.S. crude and the global benchmark fell more than 10% in 2023 on worries that the…

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