Oil fell as risk-off sentiment in equities markets outweighed Red Sea shipping dangers.

West Texas Intermediate crude is stuck in a narrow trading range even after Houthi attacks on merchant ships in the Red Sea gave prices a boost earlier in the session. 

While the strikes have prompted Shell Plc to suspend all shipments through the area, physical crude supplies remain unaffected. Chevron Corp. CEO Mike Wirth told Bloomberg Television Tuesday the company has not made “fundamental” changes to shipping routes.

Until the market sees a real disruption of petroleum products through the Red Sea, “crude futures will remain rangebound,” said Dennis Kissler, senior vice president at BOK Financial. 

The Israel-Hamas conflict saw a war-risk premium built into crude, but that faded after a couple of weeks. The US-led attack on Houthi targets last week, in retaliation for continued strikes on vessels, has ratcheted up the tension again. The main risk is Iran getting pulled directly into the conflict, but oil markets seem to be discounting that possibility.

While no output has been lost, the diversions are “indirectly tightening the market by forcing oil stocks on water” to pile up, Citigroup Inc. said in a note. Still, “it is not our base case that US/UK strikes on Houthi targets in Yemen and issues in the Red Sea will lead to a substantive upside.”

Prices:

• WTI for February delivery fell  1 per cent to US$71.89a barrel at 10:41 a.m. in New York.
• Futures didn’t settle Monday because of a US holiday.
• Brent for March settlement traded 0.4 per cent to US$77.80