Oil edged lower today after the US announced the creation of a task force to safeguard Red Sea commerce from attacks by Iran-backed Yemeni militants, which have disrupted maritime trade and forced companies to reroute vessels.
Crude climbed nearly 2% yesterday after a Norwegian-owned vessel was attacked and BP said it had paused all transit through the Red Sea, raising concern over supply disruption. About 12% of world shipping traffic passes through the Suez Canal.
Brent crude slipped 22 cents, or 0.3%, to $77.73 a barrel this afternoon. US West Texas Intermediate crude for January, which expires today, was down 42 cents at $72.05 while the more active February contract lost 27 cents.
Though the attacks on shipping have boosted the geopolitical risk premium, "the actual effect on oil flows is likely to be limited", said John Evans of oil broker PVM.
"The attacks have not hit anything that would interfere with production," he said.
The UK, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain are among nations involved in the operation.
Goldman Sachs analysts said the disruption is unlikely to have a large effect on crude and liquefied natural gas (LNG) prices because opportunities to reroute vessels suggest that production should not be directly affected.
Oil major BP has temporarily halted transit through the Red Sea and oil tanker group Frontline said its vessels would avoid the route - signs that the crisis was broadening to include energy shipments.
Also in focus this week will be the latest snapshot of US supplies. US crude inventories are expected to decline by 2.2 million barrels, a Reuters poll showed.
