OIL FUTURES: Crude slides as more shippers resume Red Sea transits

Crude oil futures settled lower Dec. 27 as the market discounted Red Sea tensions after more shippers said they would resume Bab al-Mandib transits, displaying confidence in a US-led naval force to protect the key waterway despite multiple attacks over the weekend.

NYMEX February WTI settled $1.46 lower at $74.11/b and ICE February Brent dipped $1.42 to 79.65/b.

French shipper CMA CGM has resumed some vessel transits through the Red Sea, according to media reports Dec. 27, joining Danish shipper A.P. Moller-Maersk, which announced Dec. 24 that it would resume transits.

The moves reflects "apparent confidence that the US-led task force will be successful in suppressing the attacks on shipping by Yemen's Iranian-backed Houthi rebels," said Tim Evans of Evans on Energy.

The US said Dec. 18 it would launch Operation Prosperity Guardian to deploy a joint naval task force around the Red Sea to deter further maritime attacks with the UK, Bahrain, Canada, France, Italy, the Netherlands, Norway, the Seychelles and Spain.

The number of countries in this operation later expanded to more than 20, although Spain, France, and Italy have indicated they would not be directly involved, according to media reports.

On the Southeast Asia-to-East Coast North America route, Platts assessment showed container freight rose to $2,800/FEU Dec. 22, the highest since early September, from $2,250/FEU Dec. 15. Platts is part of S&P Global Commodity Insights.

"[Crude prices] eased on Wednesday after a whopping rebound in the previous session as investors re-assessed the impact on global supplies," Priyanka Sachdeva, senior market analyst at Phillip Nova, said Dec. 27, noting that thin market depth was also contributing to price volatility.

"Despite shutting down shipping channels and re-routing vessels, how far the global supplies are impacted is still debatable," she added.

NYMEX January RBOB settled 33 points lower at $2.1550/gal and January ULSD dipped 4.49 cents to settle at $2.6239/gal.

"Oil markets are heading into 2024 with a new equilibrium," Jim Burkhard, vice president and head of Research for Oil Markets, Energy and Mobility at S&P Global wrote this month, adding, "OPEC+ supply management keeps prices from falling below a certain floor, at least for any significant amount of time. At the same time, prices remain high enough to support oil production growth outside of OPEC+, which, in turn, deters prices from surging too high."