(News Bulletin 247) – Black gold prices are on the rise again after a further escalation of tensions in the Red Sea. Which once again benefits oil groups like Totalenergies on the stock market.

Oil prices are yo-yoing at the start of 2024, caught between geopolitical tensions and the level of demand for black gold.

This Friday, price movements are driven by new tensions in the Red Sea. And they went up a notch again during the night from Thursday to Friday. The United States and the United Kingdom have carried out airstrikes against the Houthis in Yemen, in response to multiple attacks carried out by these rebels against container ships in the Red Sea.

The Red Sea, the capital of world trade

Since mid-November, the Houthis have carried out 26 attacks in the Red Sea, according to the US military, to the point where local container ship traffic has fallen by around 70%, founder Ami Daniel told AFP. and director of Windward, a maritime transport consulting and expertise company.

This instability in the area is forcing shipowners and other oil companies to bypass this strategic artery for world trade. Since December, these multiple attacks have disrupted global maritime traffic. Stifel recalled in this regard that the Red Sea, and by extension the Suez Canal, constitutes “one of the main arteries of container trade”, in a note published last month.

The consequences of the renewed tensions are beginning to be felt for certain groups. This Thursday, the electric car manufacturer Tesla announced that it would suspend most of its production for two weeks at its European factory located near Berlin, citing a shortage of parts due to the lengthening of transport routes in due to attacks in the Red Sea.

“The only viable alternative for container carriers is to go via the Cape of Good Hope, which extends the journey time by around a third,” explained Stifel, adding an additional 10 days of navigation time.

A rebound in prices after the Saudi decision

And this embrace of the situation in the Middle East is fueling new fears about the supply of black gold. Thus, the price of a barrel of Brent from the North Sea for delivery in March rose 2.4% to 79.23 dollars, while its American equivalent, a barrel of West Texas Intermediate (WTI) for delivery in February, jumped to its share of 2.60% to 73.87 dollars.

Unsurprisingly, oil stocks are also accelerating upward, and benefiting from the sharp rebound in black gold prices. In Paris, Totalenergies increased by 2%, Vallourec rebounded by 4% while Technip Energies gained 1.3%. On the other hand, Vallourec lost almost 1%.

These concerns in the Red Sea offset fears about weak demand. On Monday, oil prices lost more than 3%, weighed down by Saudi Arabia’s decision to reduce the selling price of its crude to the lowest of November 2021. This decision then reflected the weakness of demand from its customers. Asian countries, led by China, which is the world’s leading importer of oil.

Also, this decision illustrates the dissensions within the Organization of the Petroleum Exporting Countries and its allies. The kingdom was at the forefront of this strategy of supporting prices, by reducing its production by around 2 million barrels per day since the fall of 2022. However, the Saudis want to regain control so as not to lose any more market share, while other cartel producers do not play the game.

“This looks like a warning shot, probably aimed at other producers, whether Russia, the United States, but also those who refused production cuts (during the last meeting of the Organization of Exporting Countries oil) or who do not keep their reduction commitments,” Robert Yawger of Mizuho commented to AFP.