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- The Oil price recovers strongly to near $83.20 on Wednesday due to multiple tailwinds.
- Houthis mull fees on ships using the Southern Red Sea route.
- US-Saudi joint military operation against Iran-aligned Houthis helped Oil prices snap a three-day losing streak.
West Texas Intermediate (WTI) futures on NYMEX trades 6% higher on the day, slightly above $83.00 during the European trading session on Wednesday. The Oil price bounces back strongly after snapping a three-day losing streak amid fears of a prolonged energy supply squeeze due to Iran’s intentions to bring a toll system into effect at various chokepoints around the Middle East.
During the day, a report from Reuters showed that Yemen’s Houthis are considering imposing fees on commercial ships sailing through the Southern Red Sea. Houthis are mulling a toll system on Bab el-Mandeb Strait, gateway to almost 7% of the global oil supply, which was hijacked by them last week.
With Iran being prevented from imposing tolls in the Strait of Hormuz, a vital passage to almost 20% of the global energy supply, by the United States (US) and other Middle East nations, Houthis’ move to implement a toll system on another key shipping route could result in a fresh escalation in military aggression between both nations. Such a scenario would increase fears of prolonged energy supply disruption.
The Oil price was already opened significantly higher as the joint military operation by Saudi Arabia and US Central Command (CENTCOM) on Iran-aligned Houthis in Iraq in retaliation for attacks on Saudi energy facilities in the Eastern Province and Riyadh regions, Al Jazeera reported.
Analysts at Rabobank said in a note, “The Saudi-US retaliation for strikes on Saudi oil infrastructure underscored how the evolving cycle of attacks and counterattacks is keeping a firm bid under crude benchmarks.”
