Oil Prices Rise 1% Following Red Sea Incident and Russian Refinery Issues

Oil prices experienced a 1% surge on Monday, driven by concerns over fuel supply disruptions after a missile struck a fuel tanker operated by Trafigura in the Red Sea. Additionally, Russian refined products exports are expected to decline due to ongoing repairs at several refineries following drone attacks.

As of 2341 GMT, Brent crude futures climbed 83 cents to reach $84.38 a barrel, touching a session-high of $84.80. U.S. West Texas Intermediate crude rose 78 cents to $78.79 a barrel.

Trafigura, a commodities trader, announced on Saturday that it was evaluating the security risks associated with further Red Sea voyages after a Houthi group missile attack ignited a blaze on one of its tankers.

ANZ analysts noted, “Disruptions to supply have been limited, but that changed on Friday after an oil tanker operating on behalf of Trafigura was hit by a missile off the coast of Yemen. With oil tankers linked to the U.S. and UK now under threat of attack, the market is likely to reprice the risk of disruptions.”

Both oil contracts marked a second consecutive week of gains, settling at their highest levels in nearly two months on Friday. The support came from concerns over Middle East and Russian supply issues, coupled with positive U.S. economic growth and indications of Chinese stimulus fostering demand expectations.

Following fires that disrupted operations at refineries on the Baltic and Black Seas, Russia is anticipated to reduce exports of naphtha, a petrochemical feedstock, by approximately 127,500 to 136,000 barrels per day, constituting about a third of its total exports.

On February 1, leading ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, will meet online. However, OPEC+ sources suggest that decisions on oil production levels for April and beyond will likely be made in the coming weeks, as the February meeting is too early for such determinations.

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