MARKET WATCH: Oil markets show muted reaction to attacks on Saudi tankers

The light, sweet crude oil contract for September settled above $69/bbl for a second consecutive day on the New York market July 26 while Brent crude oil for September settled above $74/bbl.
July 27, 2018
2 min read

The light, sweet crude oil contract for September settled above $69/bbl for a second consecutive day on the New York market July 26 while Brent crude oil for September settled above $74/bbl.

Oil market participants displayed only a subdued reaction to Saudi Arabia halting crude shipments via the Red Sea trade route of Bab el-Mandeb Strait on July 25 after Houthi rebels attacked two tankers. Houthi rebels are in Yemen.

The attacks were not seen as an immediate threat to world oil supply. Analysts cited recent increased Saudi crude supply alongside rising production from other Organization of Petroleum Exporting Countries members and non-OPEC Russia.

Paul Sheldon, chief geopolitical adviser at S&P Global Platts Analytics, said, “The Bab el-Mandeb off the west coast of Yemen is particularly vulnerable to Houthi missiles and is home to around 1.5 million b/d of Gulf crude shipments to Europe.”

Sheldon said, “Kuwait and other gulf producers also use the route, but their reaction is currently unclear. The Saudi move will likely force tankers on a longer trip around Africa.”

This could eventually support oil price raises for Brent and other grades due to higher requirement for crude volumes at sea, he said.

“Until now, Houthi attempts at disabling Saudi targets have proved largely unsuccessful but remain an underreported security risk in the world’s largest oil-producing region,” Sheldon said.

Saudi Aramco issued a statement, saying, “Two very large crude carriers, each with a 2 million bbl capacity…were attacked by terrorist Houthi militia…in the Red Sea. One of the ships sustained minimal damage. No injuries nor oil spill have been reported.”

Energy prices

The light, sweet crude contract for September delivery on the New York Mercantile Exchange rose 31¢ to close at $69.61/bbl on July 26. The October contract gained 42¢ to settle at $68.43/bbl.

The NYMEX natural gas price for August edged up less than 1¢ to a rounded $2.78/MMbtu. The Henry Hub cash gas price added 1¢ to $2.78/MMbtu.

Ultralow-sulfur diesel for August rose 2.5¢ to $2.18/gal. The NYMEX reformulated gasoline blendstock for August gained nearly 4¢ to settle at $2.16/gal.

Brent crude oil for September gained 61¢ to $74.54/bbl on London’s International Commodity Exchange. The October contract added 71¢ to settle at $75.12/bbl. The gas oil contract for August was $663.75/tonne, up $7.

The OPEC basket of crudes average price for July 26 was $73.62/bbl, up 75¢.

Contact Paula Dittrick at [email protected].

About the Author

Paula Dittrick

Senior Staff Writer

Paula Dittrick has covered oil and gas from Houston for more than 20 years. Starting in May 2007, she developed a health, safety, and environment beat for Oil & Gas Journal. Dittrick is familiar with the industry’s financial aspects. She also monitors issues associated with carbon sequestration and renewable energy.

Dittrick joined OGJ in February 2001. Previously, she worked for Dow Jones and United Press International. She began writing about oil and gas as UPI’s West Texas bureau chief during the 1980s. She earned a Bachelor’s of Science degree in journalism from the University of Nebraska in 1974.

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