ISLAMABAD
Crude oil prices edged lower on Tuesday after the United States announced the creation of a multinational operation to safeguard Red Sea commerce, which allayed fears of geopolitical risks.
As of 1250 hours GMT, Brent, the international benchmark for two-thirds of the world’s oil, shed $0.19 (-0.24 percent) to reach $77.76 a barrel. The West Texas Intermediate (WTI), the main oil benchmark for North America, went down by $0.21 (-0.29 percent) to $72.26 a barrel. Brent rose by $0.71 on WoW last week while WTI closed last week higher by $0.20.
However, the price of Russian Sokol increased by $0.64 (+0.89 percent) to $72.16.
Arab Light prices witnessed an increase of $0.63 (+0.79 percent) to reach $80.61 a barrel. On the other hand, the price for Opec Basket went up to $78.03 a barrel with an increase of $1.26 (+1.64 percent). The OPEC Reference Basket of Crudes (ORB) is made up of Saharan Blend, Girassol, Djeno, Zafiro, Rabi Light, Iran Heavy, Basra Light, Kuwait Export, Es Sider, Bonny Light, Arab Light, Murban and Merey.
The United States on Tuesday announced the creation of a multinational operation to safeguard Red Sea commerce. The United Kingdom, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain are among the nations involved.
Though the attacks on shipping have boosted the geopolitical risk premium, the actual effect on oil flows is likely to be limited. The attacks have not hit anything that would interfere with production.
Goldman Sachs analysts said the disruption is unlikely to have a large effect on crude and liquefied natural gas (LNG) prices because opportunities to reroute vessels suggest that production should not be directly affected.
Meanwhile, China’s state oil and chemicals giant Sinochem has bought a rare cargo of Venezuelan crude, as Chinese state-owned firms look to acquire cheaper crudes without fear of secondary sanctions now that the US has eased the restrictions on Venezuela. The temporary US sanctions relief from October 2023 to April 2024 now allows the production, lifting, sale, and exportation of oil or gas from Venezuela, and the provision of related goods and services, as well as payment of invoices for goods or services related to oil or gas sector operations in Venezuela. As a result, the top international oil trading houses are back in the business of trading with oil from Venezuela.
Refiners willing to take advantage of the eased sanctions have arranged spot purchases of Venezuelan heavy crude, which is cheaper than international benchmarks, although the discount is not as wide as it was a few months ago when the South American country was still under sanctions. Since the US eased the sanctions, demand for Venezuelan crude outside China has increased. India, for example, said last week it would buy oil from Venezuela for the first such purchase since 2020.
