BAKU, Azerbaijan, January 24. Since November 2023, the Houthi rebel group in Yemen has been actively targeting vessels traversing the Bab al-Mandab Strait—a narrow 20-mile (32km) channel dividing northeast Africa from the Arabian Peninsula in Yemen. Their stated objective is to focus on vessels associated with Israel, a move initiated in response to the conflict in the Gaza Strip.
In light of heightened geopolitical risks, accentuated by recent shipping disruptions, Fitch Ratings anticipates the retention of the oil price premium, Trend reports.
Despite these challenges, Fitch does not foresee a significant increase beyond its USD80/bbl Brent price assumption for 2024, barring substantial disruptions to actual oil production or a broader escalation of attacks on critical oil transport routes. This outlook is grounded in the presence of material spare capacity within OPEC+.
Approximately 12 percent of global oil seaborne trade in the first half of 2023 relied on total oil shipments through the Suez Canal, the SUMED pipeline, and the Bab-el-Mandeb Strait, as reported by the EIA. Notably, Houthi attacks have predominantly targeted the Bab-el-Mandeb Strait. Northbound oil shipments through the Suez Canal and the SUMED pipeline serve Europe, predominantly from Saudi Arabia and Iraq. Meanwhile, southbound flows primarily consist of Russian oil exports to China and India following EU sanctions on Russian oil imports.
Major players such as bp, Shell, QatarEnergy, and several shippers have opted to cease transit through the Suez Canal, redirecting their routes around Africa. While this may marginally tighten oil and gas markets temporarily, as supply chains adjust to the alternative route, Fitch does not foresee a substantial impact on prices.
With over 5 million barrels per day (MMbpd) of OPEC+ spare capacity as of January 2024 and a balanced global oil supply and demand landscape, Fitch predicts a well-supplied global oil market in 2024. This resilience is expected to mitigate any potential effects of prolonged or intensified disruptions. The International Energy Agency (IEA) forecasts a moderation in global oil demand growth to 1.2MMbpd in 2024, influenced by reduced world economic growth and China's slower oil consumption growth. Fitch foresees continued robust supply growth, supported by non-OPEC producers.
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