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Oil rises as Red Sea attacks disrupt maritime trade

Oil rises

Brent crude futures gained $1.28, or 1.6 per cent, to settle at $79.23 a barrel and U.S. WTI crude futures for January delivery added 97 cents, or 1.3 per cent, to settle at $73.44 a barrel

Oil prices rose more than a dollar a barrel on Tuesday, extending the previous session’s gains after attacks on ships in the Red Sea disrupted maritime trade and forced more companies to reroute vessels.

Brent crude futures gained $1.28, or 1.6 per cent, to settle at $79.23 a barrel, the highest since December 1. U.S. West Texas Intermediate crude futures for January delivery, which expired after settlement on Tuesday, added 97 cents, or 1.3 per cent, to settle at $73.44 a barrel, also the highest in more than two weeks.

How long this will go on for is also an unknown, unnerving the market, said Fiona Cincotta, senior analyst at City Index. Despite the launch of the operation to ensure safe passage through the Red Sea major shipping firms are still steering clear.

On Monday, oil prices advanced around 2 per cent after a Norwegian-owned vessel was attacked and BP said it had paused all transit through the Red Sea. A number of other shippers have since made similar announcements.

Around 12 per cent of world shipping traffic passes up the Red Sea and through the Suez Canal.

The events in the Red Sea are increasing geopolitical risk, said Rob Thummel, MD at Kansas-based energy investment firm Tortoise Capital. This is causing oil prices to rise as traders assess the potential for a supply disruption tied to increasing geopolitical risk, Thummel said.

Goldman Sachs analysts said the disruption was unlikely to have a big impact on crude and LNG prices because opportunities to reroute vessels suggest production should not be directly affected.

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