SINGAPORE: Oil prices rose on Tuesday on expectations of a recovery in the global economy after US Senate approval of a $1.9 trillion stimulus bill and on a likely drawdown in crude oil inventory in the United States.
But a stronger dollar and receding fears of oil supply disruption from Saudi Arabia after an attack on its oil facilities capped price gains.
Brent crude futures for May rose by 32 cents, or 0.5 percent, to $68.56 a barrel by 0125 GMT, while US West Texas Intermediate (WTI) crude for April rose 19 cents, or 0.3 percent, to $65.24.
“Fundamentals remain incredibly supportive, especially with Saudi Arabia in full control pursuing a tight oil policy,” Stephen Innes, chief global markets strategist at Axi said in a note.
“Brent is currently holding up above $68, suggesting speculators are likely dipping their toes back in after yesterday’s chaos.”
On Monday, Brent crude oil price rose above $70 a barrel after Yemen’s Houthi forces fired drones and missiles at the heart of the Saudi oil industry, including a Saudi Aramco facility at Ras Tanura vital to petroleum exports.
Riyadh said there were no casualties or loss of property and prices ended the day lower.
Still, the United States expressed alarm at “genuine security threats” to Saudi Arabia from Yemen’s Iran-aligned Houthis and elsewhere in the region, and said it would look at improving support for Saudi defenses.
The attacks came after the Organization of the Petroleum Exporting Countries, Russia and their oil producing allies, known as OPEC+, agreed last week agree on broadly sticking with output cuts despite rising crude prices.
Investor focus, meanwhile, remains on the prospects for a global economic recovery.
US Treasury Secretary Janet Yellen said on Monday that President Joe Biden’s $1.9 trillion coronavirus aid package will provide enough resources to fuel a “very strong” US economic recovery.
US crude oil and refined product stockpiles likely fell last week, with distillate inventories seen drawing down for fifth straight week, a preliminary Reuters poll showed on Monday.
Oil prices rise on expected economic recovery, likely drawdown in oil stocks
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Oil prices rise on expected economic recovery, likely drawdown in oil stocks
- OPEC+, agreed last week agree on broadly sticking with output cuts despite rising crude prices
Saudi ports brace for cargo surge as shipping lines reroute
RIYADH: Preliminary estimates suggest that several global shipping lines could reroute part of their operations to Saudi Arabia’s Red Sea ports, potentially adding 250,000 containers and 70,000 vehicles per month, according to Rayan Qutub, head of the Logistics Council at the Jeddah Chamber of Commerce, in an interview with Al-Eqtisadiah.
“Any disruption in the Strait of Hormuz not only affects maritime traffic in the Arabian Gulf but could also reshape global trade routes,” Qutub said, highlighting the strait’s status as one of the world’s most critical maritime chokepoints for energy and goods transport.
With rising regional tensions, international shipping companies are reassessing their routes, adjusting shipping lines, or exploring alternative sea lanes. This signals that the current challenges extend beyond the Arabian Gulf, impacting the global supply chain as a whole.
Limited impact on US, European shipments
The effects of these developments will not be uniform across trade routes. Qutub noted that goods from China and India, which rely heavily on routes through the Arabian Gulf, are most vulnerable to disruption. In contrast, shipments from Europe and the US typically traverse western maritime routes via the Suez Canal and the Red Sea, making them less susceptible to regional disturbances.
Saudi Arabia’s strategic location, he emphasized, strengthens the resilience of regional trade. The Kingdom operates an integrated network of Red Sea ports — including Jeddah, Rabigh, Yanbu, and Neom — that have benefited from substantial infrastructure upgrades and technological enhancements in recent years, boosting their capacity to absorb increased cargo volumes.
Red Sea bookings
Several major carriers, including MSC, CMA CGM, and Maersk, have already opened bookings to Saudi Red Sea ports, signaling a shift in operational focus to these strategically positioned hubs.
However, Qutub warned that rerouted shipments could increase sailing times. Cargo from Asia, which normally takes 30-45 days, might now require longer voyages via the Cape of Good Hope and the Mediterranean, potentially extending transit to 60-75 days in some cases.
These changes are also reflected in rising shipping costs, driven by longer routes, higher fuel consumption, and increased insurance premiums — a typical response when global trade patterns shift due to geopolitical pressures.
Qutub emphasized that Saudi Arabia’s transport and logistics sector is managing these developments through coordinated government oversight. The Ministry of Transport and Logistics, the Logistics National Committee, and the Logistics Partnership Council recently convened to evaluate the impact on trade and supply chains. Regular weekly meetings have been established to monitor developments and implement solutions to safeguard the stability of supplies and continuity of trade.
He noted that the Kingdom’s logistical readiness is the result of long-term strategic investments, encompassing ports, airports, road networks, rail systems, and logistics zones. Today, Saudi logistics integrates maritime, land, rail, and air transport, enabling a resilient response to global disruptions.
Qutub also highlighted the need for the private sector to continuously review logistics and crisis management strategies, develop alternative plans, and manage strategic stockpiles. Such measures are essential to mitigate temporary fluctuations in global trade and ensure smooth supply chain operations.
