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Investing.com -- Oil prices soared higher Monday on concerns of disruptions to global supply, particularly to the important Asian market, following mounting attacks by the Houthis on ships in the Red Sea.
By 09:15 ET (14.15 GMT), the U.S. crude futures traded 2.8% higher at $73.78 a barrel and the Brent crude contract climbed 2.9% to $78.73 a barrel.
Both benchmarks posted small gains last week, breaking a run of seven losing weeks, after a U.S. Federal Reserve meeting last week raised hopes of interest rate cuts next year.
Tankers seek to avoid Suez canal
A Norwegian-owned vessel was attacked in the Red Sea on Monday, adding to the series of missile and drone attacks on ships in the area by the Iran-aligned Yemeni Houthi militant group, which it claims are a response to Israel's assault on the Gaza Strip.
This has prompted a number of shipping firms to say over the weekend that they would avoid the region, meaning they would have to take the much longer route around the Cape of Good Hope to avoid the Suez canal.
Oil major BP (NYSE:BP) also stated that it will pause all shipments through the Red Sea, "in light of the deteriorating security situation for shipping," adding it would "keep this precautionary pause under ongoing review."
Russia to deepen oil supply cuts
The crude market had already started the new week with gains after Russia said on Sunday it would deepen oil export cuts in December by potentially 50,000 barrels per day or more.
The world's biggest exporters, led by Saudi Arabia and Russia, have been attempting to curb supply into the global market in an attempt to support oil prices.
However, the last meeting was widely seen as underwhelming given the output cuts were voluntary in nature, growing dissent within the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, over the policy.
Additionally, bad weather had already resulted in Moscow suspending about two-thirds of loadings of its main export grade Urals crude on Friday, meaning Sunday’s announcement could be just a repackaging of the storm-related outage.
These cuts may well be needed given the continued supply from non-OPEC sources, led by the U.S., which reported a monthly record production level in November.
Goldman Sachs (NYSE:GS) cut its price expectation for Brent crude in 2024 by $10 per barrel to between $70 and $90, saying strong production from the United States would moderate any upside in oil prices.
German economy leads Europe lower
Traders also have to contend with the deteriorating economic situation in Europe, a major crude consuming region.
Economic data released earlier Monday showed that German business morale unexpectedly worsened in December, adding to the evidence that the region’s dominant economy could be in recession as the year draws to a close.
"As the year draws to a close, the German economy remains weak," Ifo president Clemens Fuest said.
German gross domestic product fell 0.1% on the quarter in the third quarter, and another fall in the final quarter of the year would mean a technical recession.
