Oil prices set for weekly gain as Red Sea tension persists

Oil prices set for weekly gain as Red Sea tension persists

Oil prices rose on December 22 as tensions persisted in the Middle East following Houthi attacks on ships in the Red Sea, although Angola's decision to leave OPEC raised questions over the group's effectiveness in supporting prices.

Brent crude futures were up 92 cents, or 1.2%, to $80.31 a barrel at 1445 GMT.

US West Texas Intermediate (WTI) crude futures were up $1.02, or 1.4%, at $74.91 a barrel.

Both Brent and WTI futures were on track for an over 4% week-on-week gain, buoyed by rising geopolitical risks due to the Red Sea attacks and potential disruptions to shipping operations.

More maritime carriers are avoiding the Red Sea due to attacks on vessels carried out by the Houthi militant group, which says it is responding to Israel's war in Gaza.

And on December 22, major shippers Maersk and CMA CGM said they would impose extra charges linked to re-routing ships.

The attacks have caused disruptions through the Suez Canal, which handles about 12% of world trade.

"Direct pauses to supply are not the only reason oil prices will be moved by the Red Sea situation; freight rates and insurance costs are increasing and not just because of pseudo-war premiums," said PVM analyst John Evans about the impact of the disruption.

Despite the geopolitical tensions supporting oil, prices recorded day-on-day declines on Thursday as Angola announced it would leave OPEC.

The African nation – which produces around 1.1 million barrels per day of oil – said its membership of the organisation was not serving its interests, having protested against the decision by the wider OPEC+ group to reduce Angola's output quota for 2024.

"This course of action has been rather predictable because of Angola's attitude at the last OPEC meeting, nonetheless it brings into mind percolating divisions that might beset unity going forward," PVM's Evans added.