Oil tankers and cargo ships at danger in the Red Sea

19 בדצמ׳ 2023

Since the breakout of the Israel-Hamas War on 7th October 2023, there has been an increasing number of attacks on military and transport ships sailing through the Red Sea, with Houthi rebels from Yemen standing behind many of these incidents. About a week ago, the group went as far as to announce the blockade on ships traveling to and from Israel through the Red Sea, which prompted large transportation companies to announce a pause on shipping through this particular route. The Danish shipping company, A.P. Moller Maersk, announced last Friday that it would halt all shipping via the Red Sea route following a near-miss incident involving Maersk Gibraltar on Thursday and another attack on a container ship. The next day, the Medditerean Shipping Company announced the same thing following Friday’s attack on its vessel MSC Palatium III. These two companies were quickly joined by Hong Kong based Orient Overseas Container Line, Taiwanese Evergreen, Belgian Euronav, and French CMA CGM Group, which happens to be the third-largest container shipping company in the world. Then, yesterday, the first major oil and gas transporter, British Petroleum, announced it would also halt shipments through the Red Sea. As a result, many of the mentioned cargo ships and oil tankers will have to be rerouted via alternative paths; such changes are likely to cause (some) supply chain disruptions and soaring costs for transporting goods (as well as operating expenses for the companies themselves). To resolve the situation after weeks of relentless drone and missile attacks, the United States finally announced yesterday that it would no longer tolerate Houthis’ aggression in the region and that it would form a task force responsible for protecting international waters in the Red Sea and Bab Al-Mandev Strait. As for our outlook for the oil market, it remains unchanged, with a price target of $65 per barrel in 2024. However, we are aware that the situation could deteriorate further if Iran-backed Houthis continue to ramp up their attacks in the foreseeable future (especially against U.S. warships, which has been the case recently). We will closely monitor the situation and report new developments once they arise.

Illustration 1.01

Illustration 1.01 displays the daily chart of USOIL and simple support/resistance levels derived from past peaks and troughs.

Technical analysis
Daily time frame = Bearish (turning neutral)
Weekly time frame = Bearish

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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.

20 בדצמ׳ 2023

הערה

In a new political development regarding the situation in the Red Sea, the Biden administration announced it is considering (re)designating Yemen's Houthis as a terrorist organization.

20 בדצמ׳ 2023

הערה

A breakout above the upper bound of the downward-sloping channel is one thing to watch out for in the very short term. It will likely bolster the odds of USOIL continuing slightly higher (potentially somewhere in the range between $77 and $78).