(Bloomberg) — Oil edged higher as a fresh wave of strikes by the US against Houthi targets in Yemen sustained tensions in the Middle East and reinforced the prospect of prolonged disruptions to global shipping patterns.
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Global benchmark Brent topped $78 a barrel after ending lower on Wednesday, while West Texas Intermediate was near $73. The US struck more than a dozen Houthi missile launchers to push back against the Tehran-backed group’s repeated attacks on shipping, US Central Command said. In a sign of tensions elsewhere, Pakistan was reported to have carried out overnight strikes in Iran.
Widely watched timespreads suggest conditions are tightening. Brent’s three-month spread widened to almost $1 a barrel in backwardation, a bullish pattern in which prompt prices command a premium to those further out. That compares with 33 cents in contango, the opposite structure, a month ago.
The crisis in Yemen has cut transits through the Red Sea and Suez Canal, snarling trade flows as ships avoid the area and take longer, alternative routes. The Biden administration will put the group back on a terrorism list. The Houthis say they are acting in support of Hamas as it battles Israel.
Crude oil has been buffeted in the opening weeks of the year by the escalating crisis in the Middle East, as well as concerns that demand growth will slow this year and the Federal Reserve will start cutting interest rates later than had been expected. Traders are also gauging the impact of supply cuts from the Organization of Petroleum Exporting Countries and its allies.
If the Red Sea situation spills over, there could be a short-term jump in prices, said Gao Jian, an analyst at Shandong-based Qisheng Futures Co. Still, oil’s been capped by weak fundamentals since late last year, he said.
The industry-backed American Petroleum Institute, meanwhile, reported a small increase in nationwide US crude inventories but a decline at the key hub at Cushing, Oklahoma. At the same time, it flagged increases in gasoline and distillate stockpiles. Official figures will be issued later on Thursday.
Ahead of that data, the International Energy Agency is scheduled to release its monthly market snapshot, giving insights into expected balances over the coming quarters. On Wednesday, OPEC forecast that global oil demand will continue to increase strongly next year and exceed growth in supplies.
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