Oil drops almost 2% as investors watch Red Sea developments

Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S.  REUTERS/Drone Base/File photo

NEW YORK  –Oil prices dropped nearly 2 percent on Wednesday, eating into the previous day’s gains as investors monitored developments in the Red Sea, where shippers are returning despite further attacks on Tuesday.

Brent crude futures settled down $1.42, or 1.8 percent, at $79.65 a barrel. U.S. West Texas Intermediate crude fell $1.46, or 1.9 percent, to $74.11.

Danish shipping company Maersk said it has scheduled several dozen container vessels to travel via the Suez Canal and Red Sea in the coming weeks after calling a temporary halt to those routes this month after attacks by Yemen’s Iran-backed Houthi militia.

France’s CMA CGM also said it was resuming passage through the Red Sea after deployment of a multinational task force to the region.

READ: Shipping giant CMA-CGM joins Maersk in Red Sea return

“I think we have to wait and see whether the increased naval patrols and rerouting of ships lead to a decline in attacks,” said Callum Macpherson, head of commodities at Investec.

Both the Brent and WTI benchmarks settled more than 2 percent higher in the previous session as the latest attacks on ships in the Red Sea prompted fears of shipping disruption.

The prospect of a prolonged Israeli military campaign in Gaza remained a major driver of market sentiment.

Israeli forces pummeled central Gaza by land, sea and air on Wednesday, a day after Israel’s Chief of Staff Herzi Halevi told reporters the war would go on “for many months”.

READ: More than 20 countries now part of US-led Red Sea coalition–Pentagon

Elsewhere, oil loadings at the Russian Black Sea port of Novorossiisk were suspended because of a storm. However, the Caspian Pipeline Consortium (CPC) terminal near the port was open, Kazakhstan’s energy ministry said.

U.S. crude oil inventories rose last week by 1.84 million barrels, according to market sources citing American Petroleum Institute figures on Wednesday.

U.S. government data on stockpiles is due on Thursday.

Oil output in Russia, the third largest producer in the world after the United States and Saudi Arabia, is expected to be steady or even to increase next year as Moscow has largely overcome Western sanctions, analysts said.