Oil supply tightens in Europe over Red Sea disruptions

BRUSSELS (Agencies): The structure of the global benchmark Brent crude futures market and some physical markets in Europe and Africa have been reflecting tighter supply partly over concerns about shipping delays as vessels avoid the Red Sea due to missile and drone attacks.

The disruptions – which have been the largest to global trade since the COVID-19 pandemic – have combined with other factors such as rising Chinese demand to increase competition for crude supply that does not have to transit the Suez Canal, and analysts say this is most evident in European markets. In a sign of tighter supply, the market structure of Brent – which is used to price nearly 80 percent of the world’s traded oil – hit its most bullish in two months on Friday, as tankers diverted from the Red Sea following recent air strikes by the United States and United Kingdom on targets in Yemen.

In response to Israel’s war on Gaza, rebels from the Iran-aligned group that controls northern Yemen and its western coastline have launched a wave of assaults on ships in the Red Sea. By targeting vessels with perceived links to Israel, the Houthis are attempting to force Tel Aviv to stop the war and allow humanitarian aid into the Gaza Strip.

Houthi activity has so far been concentrated in the narrow strait of Bab al-Mandeb, which connects the Gulf of Aden to the Red Sea. Approximately 50 ships sail through the strait every day, heading to and from the Suez Canal – a central artery for global trade.