Oil headed for its biggest weekly advance in two months as attacks in the Red Sea forced hundreds of ships to take safer but longer routes, delaying the delivery of oil cargoes.

US benchmark WTI was little changed around US$74 a barrel as reports that Russia was scaling back its export reductions in January undercut some of the Red Sea risks. Crude still was on track for a weekly gain of more than 3 per cent as attacks by the Iran-backed Houthi militant group forced more ships take extensive detours to avoid the vital waterway.

So far this week, only about 30 tankers, including crude oil and fuel carriers, have entered the Bab al-Mandab Strait at the southern end of the Red Sea, according to vessel-tracking data compiled by Bloomberg. That’s a drop of more than 40 per cent versus the daily average over the previous three weeks as the Houthis target merchant ships in a show of support of Hamas in its war with Israel.

Prices have recovered the ground they lost on Thursday, when Angola announced that it was leaving OPEC, shrinking the cartel to 12 nations. The government in Luanda’s exit follows a dispute over its production quota, but isn’t expected to have any impact on oil supplies or the group’s effort to support prices.

“The market overreacted to Angola,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “Red Sea is not an overreaction.”

Crude is headed for its first annual drop since 2020 as surging production from the US and elsewhere counters efforts by the OPEC+ alliance to shore up the market through output cuts. The outlook for demand is also fragile, with the International Energy Agency forecasting that growth will slow sharply next year.

Prices:

• WTI for February delivery rose 0.2 per cent to $74.04 at 11:30 a.m. in New York.
• Brent for February settlement was little changed at $79.38 a barrel.
• Brent’s prompt spread was 24 cents in backwardation on Friday, after being in the opposite, bearish contango pattern for most of this month.