Oil prices remained relatively stable within a narrow range, reflecting the market’s assessment of ongoing supply challenges in the Red Sea and the anticipation of increased oil production in 2024.
USOIL 4 hour chart
The past week witnessed a slight uptick in crude prices, primarily due to the disruptions caused by the Houthi group’s attacks on shipping in the Red Sea. These incidents, linked to the Iran-aligned Yemeni faction, have raised concerns about potential delays in oil shipments via the Suez Canal.
However, the potential for a rise in oil prices was tempered by the likelihood of a boost in production in 2024. This shift comes as Angola departs from the Organization of Petroleum Exporting Countries (OPEC) following disagreements over recent production reduction decisions. As a non-OPEC member, Angola is expected to ramp up its oil output next year.
Additionally, record-high production levels in the United States in December have contributed to the restrained growth in oil prices. The US has increased its output to compensate for the production cuts made by OPEC. This surge in US production, along with the less impactful production cuts by OPEC, has heightened concerns about an oversupply in the oil market in 2024, casting a shadow over future price trends.
On Tuesday, oil prices showed minimal change, with market attention divided between geopolitical tensions in the Middle East and the anticipation that the US Federal Reserve might start reducing interest rates, potentially boosting global economic growth and oil demand.
Brent crude futures experienced a modest decline of 26 cents, or 0.3%, settling at $79.13 a barrel by 0115 GMT. Meanwhile, US West Texas Intermediate crude saw a slight increase of 3 cents, priced at $73.59 a barrel.
Both oil benchmarks recorded approximately 3% gains last week, fueled by the Houthi attacks on shipping that disrupted global trade and heightened Middle Eastern tensions, including the ongoing Israel-Gaza conflict.
Denmark’s Maersk announced plans on Sunday to resume its shipping operations in the Red Sea and the Gulf of Aden. This decision follows the deployment of a US-led military initiative aimed at safeguarding commercial activities in these waters.
In response to the heightened risks, shipping companies had previously halted vessel passage through the Red Sea, a crucial link to the Suez Canal, which facilitates around 12% of global trade. Additionally, they had implemented extra charges for rerouting ships.
In a separate development, Iran refuted a US allegation that an Iranian drone had attacked a chemical tanker in the Indian Ocean.
The Pentagon reported over the weekend that the Chem Pluto, a chemical tanker flying the Liberian flag and operated by Japanese and Dutch interests, was struck approximately 200 nautical miles (370 km) off the Indian coast.
Expectations of a Federal Reserve interest rate cut next year also buoyed oil prices. This optimism follows recent US data indicating that key inflation measures are now at or below the central bank’s 2% target. Lower interest rates reduce consumer borrowing costs, potentially stimulating economic growth and increasing demand for oil.
