Oil edges lower despite Middle East conflict

Storage tanks are seen at the Petroineos Ineos petrol refinery in Lavera, France, March 29, 2022. REUTERS/Benoit Tessier/File photo

Oil prices weakened slightly on Monday as the Middle East conflict’s limited impact on crude output prompted profit taking after oil benchmarks gained 2 percent last week.

Brent crude futures settled down 14 cents, or about 0.2 percent, at $78.15 a barrel. There was no settlement for U.S. West Texas Intermediate crude due to the U.S. Martin Luther King Jr. Day holiday, but the benchmark was down 18 cents, or about 0.3 percent, at $72.50 at 1513 EST. Both benchmarks fell more than $1 per barrel earlier in the session.

Several tanker owners avoided the Red Sea and multiple tankers changed course on Friday after U.S. and Britain launched strikes against Houthi targets in Yemen after the Iran-aligned group’s attacks on shipping in response to Israel’s war against Hamas in Gaza.

READ: Ocean cargo rates climb after new Red Sea ship attacks

The conflict has also held up at least four liquefied natural gas tankers travelling in the area.

“The realization that oil supply has not been adversely impacted is leading last week’s bulls to take profit, with the move down somewhat exacerbated by a slightly stronger dollar,” said Tamas Varga of oil broker PVM.

Attacks on ships to continue

The chief negotiator for Yemen’s Houthis on Monday warned that attacks on ships headed toward Israel will continue. An anti-ship ballistic missile fired by Houthi militants struck a Marshall Islands-flagged, U.S.-owned and operated container ship on Monday, the U.S. military said in a post on social media platform X, formerly known as Twitter.

There have been no oil supply losses so far, but the shipping disruption is indirectly tightening the market by keeping 35 million barrels at sea owing to longer journeys shippers must take to avoid the Red Sea, Citi analysts wrote.

READ: UN Security Council members call for Houthis to stop attacks on shipping

In Libya, people protesting against perceived corruption threatened to shut down two more oil and gas facilities after shutting the 300,000 barrel-per-day Sharara field on Jan. 7.

The U.S. and Canada are dealing with frigid weather that is shutting in some oil production. North Dakota oil output has fallen by 400,000-425,000 bpd on extreme cold and related operational issues, the North Dakota Pipeline Authority estimated on Monday.

“Cold weather is impacting production, but (prices) seem to be down on the perception that this cold snap is going to break soon,” said Phil Flynn, an analyst at Price Futures Group in Chicago.

The economic situation also remains somewhat gloomy, with the European Central Bank warning it is too early to discuss cutting interest rates.