New coalition to secure Red Sea shipping bolsters US dollar as oil prices rally
ALBAWABA – Oil prices rallied over the last two days and the US dollar strengthened as the United States (US) formed a 10-nation anti-Houthi coalition to secure the Red Sea shipping route.
Brent crude futures dipped $0.08, or 0.1 percent, to $79.15 a barrel by 0507 GMT, according to Reuters, while West Texas Intermediate (WTI) crude was unchanged at $73.94 a barrel.
Both benchmarks rose more than 1 percent on Tuesday amid jitters over Red Seas shipping and trade disruption and tensions in the Middle East.
The US dollar also strengthened slightly against other major currencies after the US announced the official of the coalition, with Bloomberg’s US dollar index spot up 0.12 percent, at 102.2870.
Both the Pound Sterling and Euro fell against the US dollar, according to Bloomberg, down 0.57 percent and 0.26 percent, at $1.27 and $1.10, respectively.
Meanwhile, the Japanese Yen gained 0.38 percent, at 143.30.
US dollar, oil prices rally on Red Sea shipping risks, anti-Houthi coalition - Shutterstock
Global benchmark Brent held above $79 a barrel after rising more than 3 percent in the previous two sessions, Bloomberg reported.
The US and its allies are considering possible military strikes against Iran-backed Houthi rebels in Yemen, after having already announced the assignment of a task force to secure the Red Sea shipping route.
Oil prices, US dollar up on possible anti-Houthi strikes to secure Red Sea shipping
A coalition that includes Bahrain and other US allies to protect shipping through the vital waterway indicates the task force may not be enough to eliminate the threat.
The escalated geopolitical risks have introduced a premium to an oil market plagued by scepticism, according to Bloomberg, regarding OPEC+ adhering to production cuts.
Meanwhile, concerns are building that an increased supply from outside the Organization of Petroleum Exporting Countries and its allies (OPEC+) may undermine their output and supply cuts. Especially from the US.
Crude has dropped almost a fifth since late September on the prospects of a glut, as reported by Bloomberg, and as the regional fallout from Israeli onslaught on Gaza contained.
The US bought 2.1 million barrels of crude for delivery in February, its Energy Department said on Tuesday.
Overall, the US purchased about 11 million barrels in total so far, as efforts to replenish the Strategic Petroleum Reserve (SPR) continue after the largest sale in history last year.
US dollar, oil prices rally on Red Sea shipping risks, anti-Houthi coalition - Shutterstock
US crude and fuel inventories also rose last week, sources told Reuters, citing data from the American Petroleum Institute, against analysts' expectations of a decline in crude stocks in a Reuters poll.
The US Energy Information Administration (EIA) will publish official US stocks data later on Wednesday.
S&P Global Commodity Insights said looking ahead, the US is producing more oil than any country in history, leading strong non-OPEC+ supply growth. This growth is expected exceed growing global demand in 2024.
US total liquids production in the fourth quarter stands at 21.4 million barrels per day (bpd), of which 13.3 million bpd is crude and condensate, the firm added.
In the meantime, though the rising tension in the region hasn’t significantly changed the outlook for oil, multiple major shipping companies have announced avoiding the Red Sea shipping route entirely. British Petroleum (BP) also announced they will be suspending all shipping operations through the waterway.
About 12 percent of world shipping traffic passes up the Red Sea and through the Suez Canal, according to Reuters. However, the Canada-based news agency reported that the crisis’ impact on oil supply has been limited so far, as the bulk of Middle East crude is exported via the Strait of Hormuz.
