February 22, 2024

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Oil and gas prices rose as BP halted Red Sea shipments after Houthi attacks

Oil and gas prices rose as BP halted Red Sea shipments after Houthi attacks

Khaled Abdullah/Reuters

Armed men stand on the beach as the merchant ship Galaxy Leader, seized by Yemen’s Houthis last month, is anchored off the country’s Salif coast on December 5.


London
CNN

Oil and natural gas prices rose sharply on Monday after British Petroleum (BP)babyIt said it would halt all shipments through the Red Sea due to increasing attacks on commercial ships by Houthi militants from Yemen.

The decision taken by one of the world’s largest oil companies follows similar moves by major shipping companies Analysts warned that this could affect global supply chains and increase the costs of transporting goods.

The company said in a statement: “In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily stop all transit operations through the Red Sea.” He added: “We will keep this precautionary pause under constant review, taking into account the conditions developing in the region.”

Oil posted sharp gains on this news. Brent crude, the global benchmark, rose 2.7% to $78.64 a barrel by 11.15 a.m. EST. US oil rose 2.8 percent to $73.44 a barrel.

The news also affected the natural gas market. Benchmark fuel prices in Europe rose 7.7% to exceed 35.75 euros ($39.04) per megawatt hour. This is just a fraction of the all-time high of 320 euros ($349.24) per megawatt hour recorded in August 2022, at the height of the continent’s energy crisis, but it remains the most visible sign yet of turmoil in commodity markets in the wake of… Attacks.

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Air attacks by the Iran-backed Houthis, who support Hamas and the Palestinian people, have become more frequent since the outbreak of war between Israel and Hamas. The militants announced that the attacks came in retaliation against Israel. The United States and its allies are now examining the possibility of doing so Expanding the existing naval workforce In the Red Sea to protect commercial ships.

The world’s largest container shipping companies have temporarily suspended transit through one of the world’s countries Trade arteriesThis, experts say, could disrupt supply chains and raise shipping costs.

MSC, Maersk, CMA CGM and Hapag-Lloyd said in recent days they would avoid the Suez Canal due to safety concerns. The canal connects the Red Sea to the Mediterranean Sea, both of which connect Israel. The Evergreen Group’s container shipping arm joined that list on Monday, saying in a statement that it would suspend import and export services in Israel “with immediate effect until further notice.”

In another statement shared with CNN, the company said that its container ships would suspend all navigation through the Red Sea.

On Friday, the Houthis Its responsibility Attacks on two MSC ships.

“The situation is deteriorating further and concerns about safety are increasing,” French group CMA CGM said in a statement on Saturday, when it announced that ships scheduled to pass through the Red Sea had been instructed to halt their sailings “until further notice.”

“CMA CGM is taking all necessary steps to maintain transportation services to its customers,” the company added.

But analysts warned that disrupting a major east-west trade route could have knock-on effects on supply chains.

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“Global freight can expect to see price increases, rerouting, and longer transit times,” said Judah Levine, head of research at logistics company Freightos.

Already, some ships are being rerouted via Africa’s Cape of Good Hope, adding up to three weeks to journey time and increasing fuel costs.

“This means that one week of effectively redirecting capacity could have ripple effects for several months to come, after a delay of a few weeks,” UBS analysts wrote in a note on Sunday, noting that about 30% of global container trade passes through the Suez Canal. . .

If the disruptions continue, shippers may be able to “secure higher-than-expected rates” as they renegotiate long-haul connections in the coming days and weeks, analysts said.

More than 80% of global merchandise trade is transported by sea, according to the United Nations Conference on Trade and Development. Maritime traffic through the vital Panama Canal is already restricted due to… Severe dehydration.

Supply chain chaos and rising shipping costs during the Covid-19 pandemic have been key drivers of inflation, as companies pass on the increased cost of transporting their goods to consumers.

The recent turmoil may affect consumer goods companies in Europe and North America. “Consumer goods will experience the greatest impact, although the current disruptions occur during the off-peak shipping season,” said Chris Rogers, head of supply chain research at S&P Global Market Intelligence.

Rico Lohmann, chief economist at Dutch bank ING, said it was too early to know whether there would be any sustained rise in prices, and much depends on how long the disruption lasts.

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“The big difference compared to the pandemic era is that the balance of supply and demand has become much more relaxed,” he told CNN. “Container shipping currently has excess capacity, which may prevent prices from rising again.”

Levine of Fraitos echoed that sentiment. “Shipping companies can expect longer lead times due to longer journeys, but operations should continue reasonably well.”

This story has been updated with additional context and developments.

Anna Cuban, Rob North and Olesya Dmitrakova contributed reporting.