Red Sea attacks threaten global energy transit
BP, Maersk and other major tanker and ship operators have stopped sailing through Bab Al Mandeb into the Red Sea. A string of missile and drone attacks by Houthi forces in Yemen have disrupted traffic through this narrow, vital waterway, which normally carries 12 per cent and 8 per cent of the world's seaborne oil and liquefied natural gas, respectively. This is particularly urgent due to winter in the Northern Hemisphere, with Europe increasingly reliant on LNG from the Middle East after the loss of Russian gas. Alternative routes around the Cape of Good Hope are much longer, more expensive and fuel-hungry, and shipping costs are expected to rise.
Iran has been accused of directing the attacks. Possible retaliation came on Monday, when about 70 per cent of Iranian petrol stations were shut down in a cyber attack claimed by “Predatory Sparrow”, an Israel-linked hacking group.
The attacks on ships and a drop in Russian exports bumped up oil prices on Monday, with Brent crude reaching $77.95 a barrel, and further rising steeply on Tuesday to $79.52, within range of topping $80 a barrel for the first time in December.
The US Federal Reserve’s hints of interest rate cuts next year helped a small gain in prices last week, but they dropped on Friday as concerns on demand persisted and US inflation turned out higher than expectations.
Nevertheless, Opec has maintained its robust demand forecasts, banking on an increase of 2.5 million bpd this year and 2.2 million bpd next.
High oil and gas prices last year helped the five major international petroleum companies make $613 billion in operating cash flow from January 2021 to this September, but they have focused on dividends, share buybacks, debt reduction and some big acquisitions, rather than organic investment.
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