Oil Little Changed, Investors Eye Red Sea Attacks

Oil prices were little changed on Tuesday as investors eyed the impact on oil supply after attacks by Yemen's Iran-aligned Houthi militants on ships in the Red Sea disrupted maritime trade and forced companies to reroute vessels. Brent crude futures rose 6 cents to US$78.01 a barrel at 0726 GMT. The front-month US West Texas Intermediate crude futures contract , which expires on Tuesday, fell 18 cents to US$72.29 a barrel. The more active second-month contract dropped 10 cents, or 0.1%, to US$72.72.

"Given that there has been a prompt collective response from several countries to mitigate attacks, it may not provide much conviction that disruptions may be long-lasting and that led to some reservations reflected in oil prices in today's session," said Jun Rong Yeap, a market strategist at IG in Singapore. Both benchmarks rose more than 1% on Monday on concerns about shippers diverting vessels away from the Red Sea.

Oil major BP temporarily paused all transits through the Red Sea and oil tanker group Frontline said on Monday its vessels would avoid passage through the waterway, signs the crisis was broadening to include energy shipments. About 15% of world shipping traffic transits via the Suez Canal, which connects the Red Sea to the Mediterranean Sea, offering the shortest shipping route between Europe and Asia.

However, Goldman Sachs analysts said that the disruption to energy flows in the Red Sea is unlikely to have large effects on crude and liquefied natural gas (LNG) prices as vessels can be redirected. "We do estimate that a hypothetical prolonged redirection of all 7 million barrels per day of gross (Northbound and Southbound) oil flows would raise spot crude prices relative to long-dated prices by US$3-US$4/per barrel," the analysts said.

The shipping attacks have prompted the United States and its allies to discuss a task force that would protect Red Sea routes, a move that Israeli and US arch-foe Iran has warned would be a mistake. In Iran, Oil Minister Javad Owji on Monday confirmed a nationwide disruption to petrol stations was caused by a cyberattack. A hacking group that Iran accuses of having links to Israel claimed it carried out the attack that disrupted services at petrol stations across the country on Monday, Iranian state TV and Israeli local media reported.

Meanwhile, the United States will push shippers to disclose more information about their Russian oil dealings to enforce sanctions, US officials said on Monday, while acknowledging that a big chunk of the trade has already escaped Western oversight after Russia built a parallel fleet.