Red Sea tensions drive oil prices higher amid Angola’s OPEC exit

Business a.m

Oil prices rose on Friday,as tensions in the Middle East persisted following Houthi attacks on ships in the Red Sea. However, the decision by Angola to leave the Organisation of the Petroleum Exporting Countries (OPEC) raised questions about the group’s ability to keep prices high.

The price of Brent crude futures rose 40 cents, or 0.5%, to $79.79 a barrel, up from $79.29 on the previous trading day. The Ice Brent marker.       Similarly, U.S. West Texas Intermediate (WTI) crude futures rose 50 cents, or 0.68 per cent, to $74.39 a barrel.

The Houthi attacks on shipping vessels in the Red Sea have caused disruptions in global trade and shipping operations, with more maritime carriers choosing to avoid the area altogether. The U.S. has deployed a multinational force to protect trade routes in the Red Sea, but the Houthis have vowed to continue their attacks, even as the situation in the region continues to deteriorate. These disruptions, combined with rising geopolitical tensions, have been driving up the price of crude oil.

According to PVM analyst John Evans, the length of the impact of the Houthi attacks on oil prices will depend on how long shipping companies continue to avoid the Red Sea. Furthermore, the lack of clarity regarding the presence and actions of the naval coalition has contributed to price fluctuations. This is because the shipping industry is unsure how the coalition will respond to the attacks, and how effective they will be in protecting trade routes in the region.

On Thursday, oil prices fell despite the geopolitical tensions that have been supporting prices. The downward trend was prompted by the news that Angola had announced its intention to leave OPEC.

Angola, which produces approximately 1.1 million barrels of oil per day, has expressed dissatisfaction with the output quotas set by OPEC+. The African country’s decision to leave the organisation was seen as a blow to OPEC’s influence and effectiveness. This was reflected in the day-on-day decline in oil prices.

While geopolitical tensions continue to drive oil prices up, Angola’s decision to leave OPEC has created uncertainty and volatility in the market.

Evans explained that Angola’s decision to leave OPEC was not unexpected, given the country’s reaction at the previous OPEC meeting. He noted that while the division within the organisation is not new, it may present challenges to OPEC’s unity in the future.