The recent disruption to energy flows in the Red Sea, caused by attacks from Yemen’s Iran-aligned Houthi militants on ships, is not expected to have significant effects on crude oil and liquefied natural gas (LNG) prices, according to Goldman Sachs.
Oil prices saw an increase on Tuesday, extending gains from the previous session, as the attacks in the Red Sea by Houthi militants disrupted maritime trade, leading companies to reroute vessels.
BP temporarily halted all transits through the Red Sea, and tanker group Frontline announced that its vessels would avoid passage through the waterway, indicating a broadening crisis that includes energy shipments.
According to Reuters, Goldman Sachs noted that, while there may be some price impact, it is unlikely to be substantial.
“We do estimate that a hypothetical prolonged redirection of all 7 million barrels per day of gross (Northbound and Southbound) oil flows would raise spot crude prices relative to long-dated prices by $3-4/per barrel,” the investment bank said in a note dated Monday.
The situation in the Red Sea is being closely monitored, and market participants are assessing the potential for further disruptions and geopolitical developments in the region.