Crude Oil Sees Nearly 3% Increase As BP, Others Stop Shipments Through Red Sea


Topline

Oil costs rose almost 3% Monday after attacks by the Houthi militant group of Yemen on ships in the Red Sea led to a number of shipping groups, and oil giant BP, pausing business in the area, leading to costly and slower reroutes, multiple outlets reported.

Key Facts

Brent crude futures were up to $73.68 a barrel just after 1 p.m. ET on Monday—a 2.65% increase—and U.S. West Texas Intermediate crude increased 2.62% to $73.30 a barrel.

The increase came the same day British oil and gas giant BP announced it was pausing its shipments through the Red Sea after Houthi rebels continued to attack ships, with the company calling it a “precautionary pause” because of the “deteriorating security situation.”

In a note on Sunday, UBS analysts wrote that “one week of meaningful capacity rerouting could have ripple effects for several months ahead,” in part because of how much global container trade travels through the Suez Canal, CNN reported.

Before BP announced its Red Sea pause on Monday, editor in chief at shipping journal Lloyd’s List Richard Meade was already warning of “some fairly seismic activity” with regard to supply chain implications if the expected reroutes are sustained, CNBC reported.

Big Number

15%. That’s about how much of the world’s shipping traffic goes through the Suez Canal, Reuters reported, which connects the Mediterranean Sea and Red Sea and is the shortest shipping route connecting Europe and Asia.

Key Background

The increase in oil prices came shortly after BP’s announcement, though BP isn’t the only company to announce it was pausing shipments through the area. Global container shipping company Evergreen also suspended activity in the Red Sea region on Monday “until further notice” due to “rising risk and safety considerations.” In recent days, other shipping companies including CMA CGM and A.P. Moller-Maersk also announced pauses, the latter of which paused shipments Friday after one of its vessels was involved in a “near-miss incident” on Thursday and was attacked again Friday. The Iran-backed Houthi rebels have been targeting commercial vessels and U.S. Navy warships in the Red Sea for about a month as a way of showing support for Gaza-based militant group Hamas in its conflict with Israel.

Tangent

On a trip to the Middle East on Monday, U.S. Secretary of Defense Lloyd Austin said “Iran’s support for Houthi attacks on commercial vessels must stop.” Austin said the attacks are “reckless, dangerous and … violate international law,” adding the U.S. is working to create an “international coalition” to address the threats. Previously, the U.S. had been more hesitant to respond to the Houthi attacks because of fears it would escalate the war—which the U.S. is encouraging Israel to scale down—into a broader regional conflict.

Further ReadingCNNBP pauses oil tanker transits through Red Sea. Oil prices surge | CNN BusinessMORE FROM FORBESOil Giant BP Halts Shipments In The Red Sea Following Houthi AttacksBy Ana Faguy
MORE FROM FORBESMaersk Pauses Shipments Through Red Sea After Recent Houthi AttacksBy Ty Roush
MORE FROM FORBESU.S. Presses Israel To Scale Down Fighting In A Matter Of Weeks, Reports Say, Amid Rising TensionsBy Molly BohannonReutersOil climbs nearly 1% on drop in Russia exports, Red Sea jitters
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This article was originally published by a www.forbes.com . Read the Original article here. .