Oil prices set to end the week above $100 as Houthis seize key port city

Oil prices are poised to conclude the week trading above $100 per barrel for the first time in nearly four months, according to market analysts. This surge in price is attributed to rising concerns over Middle Eastern supply as Houthi rebels seized a crucial port city on the Red Sea, the Bab Al Mandeb Strait. Brent, the benchmark for two-thirds of the world's oil, dropped 2.31% to $105 a barrel at 11:16am UAE time, while West Texas Intermediate, which tracks US crude, fell 1.96% to $100.5 a barrel.

The Houthi rebels' advance towards coastal regions, including Mokha, a key port city critical for Saudi Arabia's oil flow to Asian markets, has raised fears of further disruption to Red Sea shipping. This development has added to existing pressures on Gulf supplies, with some Saudi energy facilities forced to halt operations due to Houthi attacks. The escalation is further threatening tanker traffic through the Strait of Hormuz, which has already been volatile due to ongoing clashes between the US and Iran.

Ship traffic across the Bab Al Mandeb strait decreased on Thursday, with 27 vessels crossing the chokepoint, down from 32 the previous day. Of the 27 vessels, 16 exited the Red Sea, while 11 entered. A Russia-flagged vessel carrying approximately 791,000 barrels of crude oil towards the Indian port of Sikka was among the exiting ships. Similarly, ship traffic in the Strait of Hormuz also remains thin amid US-Iranian hostilities, with only seven vessels crossing on Thursday, compared to 12 on Wednesday and 18 on Tuesday.

While oil prices have already broken above $100 per barrel, analysts are now questioning whether the market can stabilize below $120 or if another wave of supply disruptions could push crude prices into an entirely new regime. The last time Brent crude touched a four-year high of $126.41 per barrel was on April 30, driven by the Iran war and its impact on supplies. However, Saudi Arabia's production has significantly declined due to restrictions on its Gulf and Red Sea export routes, which has further supported oil prices.