On Monday, the price of oil rose almost 2% due to investor concerns about disruptions in maritime trade and increased delivery costs following an attack by the Houthi group on ships. A Norwegian vessel was attacked, and BP announced a temporary suspension of water transit. Other companies also declared their avoidance of this route.
The price of Brent crude futures increased by 17 cents (0.2%) to $78.12 per barrel. The futures contract for West Texas Intermediate crude rose by 14 cents to $72.61 per barrel, and the more active contract for the following month went up by 9 cents (0.1%) to $72.91.
Favad Razaqzada, an analyst at StoneX, noted the need to account for increased delivery costs, as many oil tankers cease voyages through the Red Sea. Approximately 15% of global shipping passes through the Suez Canal. On Monday, the London marine insurance market expanded the high-risk area in the Red Sea, leading to increased insurance premiums.
Last week, there was a slight increase in contract prices after a seven-week decline. This was linked to the meeting of the Federal Reserve System of the USA, which raised expectations of an end to interest rate hikes and a forthcoming decrease.
However, ample oil supplies limited price increases on Monday. Brent crude and US immediate delivery oil traded at a discount to future deliveries, indicating a healthy supply in the physical market.
Prices for US oil for January delivery traded 40 cents lower than February delivery prices, marking the largest spread since November 2020.
Meanwhile, Saudi Arabia's crude oil exports in October reached a four-month high, according to data from the Joint Organizations Data Initiative.
Analysts believe that some short position closures may have occurred in the markets. Financial managers reduced net long positions in US oil futures and options for the eleventh consecutive week until December 12, as reported by the US Commodity Futures Trading Commission.
According to the US Energy Information Administration (EIA), oil production in the largest US shale regions will decrease for the third consecutive month in January, while production in the Upper Permian Basin will reach a record high for the eighth consecutive month.
"Considering the current rally and positive dynamics of the past week, there is a likelihood that oil has reached its bottom," said Razaqzada of StoneX.