Tensions Escalate in Red Sea
January 2, 2024
As we start the New Year, energy prices are up, and some risk premiums get built in as tension escalates in the Red Sea. Houthi forces that Iran backs attempted an attack on a Maersk container vessel over the weekend. US helicopters defended the Maersk vessel, sinking three Houthi ships and killing 10 of the attackers. This just increased the tension of a broader conflict in the Middle East.
Group three diesel inventories have increased as demand has eased in the several weeks. Supplies are higher than they have been for this time of year since 2018. This situation has led to the cash basis being very low. This will likely continue for a month until seasonal demand picks up and refinery maintenance begins.
A Reuters survey showed that international oil prices will likely stay near $80 per barrel in 2024, as analysts predicted weak global growth would cap demand, while geopolitical tensions could provide support. The analysts questioned whether OPEC+ could sustain supply cuts to support the market.