ISLAMABAD
Oil futures settled lower despite fears about the Red Sea supply disruptions continuing to rise on mounting tension in the Middle East after the US and UK struck Houthi targets in Yemen and Iran seized a tanker in the Gulf of Oman. Major global benchmark Brent ended the week lower by 0.60 percent. Brent, the international benchmark for two-thirds of the world’s oil, fell to $78.29 a barrel from $78.76 a barrel during the week under review, showing a decrease of $0.47 on a WoW basis. Other global benchmark WTI, the main oil benchmark for North America, also closed the week down to $72.68 from $73.81 a barrel, registering a weekly decline of $1.13 (-1.53 percent). Both benchmarks gained around three percent last week.
Brent ended last week higher by 2.23 percent, while WTI closed the week up by 3.01 percent. Both benchmarks shed more than 10 percent in 2023 on a year-on-year basis.
Interestingly, crude oil prices fell week-on-week despite closing the last four sessions of the week on a positive note amid fears of an escalation in geopolitical tensions that could threaten trade and oil flows. Despite growing concerns over the situation, oil has not touched the highs it recorded after Russia’s invasion of Ukraine in 2022, when crude hit an intraday high of nearly $140 per barrel. Brent futures have currently been stuck between $74 a barrel and $79 a barrel range for weeks.
Iran seized a tanker off the coast of Oman on Thursday, further increasing regional tensions. The vessel was “an American oil tanker” that was “stolen by the US and changed its name”, Iran’s official Islamic Republic News Agency reported.
Geopolitical tensions in the Middle East have been a key driver of oil price movement since early October. But attacks by the Iran-backed Houthis on ships in the Red Sea that disrupted trade and the flow of fuel, have escalated the situation in recent weeks.
The US and UK launched air strikes against the Houthis on Thursday, in response to the escalating Red Sea attacks. The rebel group has been firing missiles at ships for the past two months to retaliate against Israel’s assault in Gaza.
On the local front, the government of Pakistan is expected to cut petrol prices by around Rs5 per litre for the second half of January, as pricing estimates till January 14 show that the international petroleum prices have fallen by more than one percent since the last fortnight. Moreover, the local currency has witnessed appreciation against the USD since last fortnight’s decision, standing at Rs280.36 per USD against Rs281.86. However, the price of high-speed diesel (HSD) is expected to witness a slight increase of Rs2 per litre due to an uptick in international diesel prices.
In the last fortnight, the government maintained petrol and diesel prices at Rs267.34 and Rs276.21 per litre, respectively. The government will announce the new prices at midnight on January 15, 2024, and they will remain in effect for the rest of January.
