Brent crude futures were up 13 cents, or 0.2%, to $78.42 a barrel after settling 1.1% higher on Friday
Oil prices rose on Monday as traders watched for supply disruption risks in the Middle East after renewed tensions in the region.
Brent crude futures were up 13 cents, or 0.2%, to $78.42 a barrel by 0405 GMT after settling 1.1% higher on Friday. U.S. West Texas Intermediate (WTI) crude was at $72.73 a barrel, up 5 cents, or 0.1%, after a near 1% gain in the earlier session.
The benchmarks climbed more than 2% last week to hit their highest intraday levels this year after retaliations by the U.S. following attacks on shipping in the Red Sea.
There are supply risks for the market given the escalation in the Red Sea, said Warren Patterson, head of commodities research at ING. However, for now we are not seeing any impact on oil supply. And I guess we would need to see significant escalation before that occurs.
A number of tanker owners steered clear of the Red Sea and several tankers changed course on Friday after the strikes, although traders were still watching out for Iran’s response and impact on shipments in the Strait of Hormuz, the world’s most important oil chokepoint.
As the Middle East conflict is currently not affecting oil production, the geopolitical risk premium priced in oil prices now seems modest based on the implied volatility of options, Goldman Sachs analysts said in a note.
While unlikely to materialise in our view, we estimate that oil prices would increase 20% in the first month of a Strait of Hormuz interruption, and may temporarily double in a less likely extended disruption, the analysts said.
