Oil prices have stabilized, but analysts warn that they may rise in 2024

  • Oil prices fell sharply over the past week amid hopes of reaching a truce between Israel and Hamas
  • The interruption of shipping in the Red Sea has not yet led to a rise in prices
  • Analysts believe that OPEC cuts and tensions in the Middle East will lead to higher oil prices

Oil prices fell on Tuesday, as US-led raids on Houthi rebel targets helped stabilize prices, after a sharp decline on hopes for a ceasefire between Israel and Hamas.

Brent crude futures had recovered to $77.97 a barrel by mid-morning, after falling from a high of $83.55 a barrel in January, while West Texas Intermediate was at $72.68 compared to a 2024 high of $78.01.

But analysts warned that markets could expect higher oil prices this year, as geopolitical tensions, a strong US dollar and weak production drive demand.

The transformation of shipping from a vital trade route has not yet led to a jump in oil prices due to improved US production

The transformation of shipping from a vital trade route has not yet led to a jump in oil prices due to improved US production

Houthi attacks in the Red Sea diverted ship traffic from the Suez Canal trade routeMore than 15 percent of global trade flows from Asia and the Middle East to Europe.

This resulted in the cost of delivering goods rising by 300 percent and delays of up to 18 days.

While this led to concerns about a possible return of consumer price inflation, the impact on oil prices was mitigated by increased energy production in the United States.

“Oil prices rose again, settling above $77 a barrel, after the US-led coalition hit more Houthi rebel targets this weekend,” said Susanna Streeter, head of finance and markets at Hargreaves Lansdowne.

“However, hopes for a truce between Israel and Hamas remain alive, with US Secretary of State Antony Blinken returning to the region.”

Brent crude prices remain well below the June 2022 high of $122.01 per barrel, when the Russian invasion of Ukraine, the reopening of the Chinese economy after Covid restrictions and a decline in inventories globally sent prices higher.

Oil prices are expected to exceed $80 per barrel in 2024

Oil prices are expected to exceed $80 per barrel in 2024

Analysts expect oil prices to rise this year

But analysts expect that current geopolitical tensions as well as expected changes in production levels will push prices higher again this year.

BP said on Tuesday that it expects oil prices to rise Moving forward after a 2023 decline that saw profits halved.

Brent crude traded at an average of $82.64 per barrel in 2023, according to the energy giant, down from $101.32 per barrel the year before.

The Economist Intelligence Unit expects oil prices to “buck” the generally downward trend in hydrocarbon prices in 2024, despite rising US production, amid expected OPEC cuts.

“Since Saudi Arabia is unlikely to significantly increase its production this year, and with other OPEC members also implementing voluntary cuts, the market will periodically return to deficit, which will limit the downside to the oil price outlook,” she said.

“Global oil demand will also put a floor on prices, set to reach record levels in 2024 and in subsequent years as consumption in the developing world continues to increase.

The heightened geopolitical risks associated with the war between Israel and Hamas continue to threaten prices to rise again. Although we expect crude oil prices to remain volatile, they are expected to trade mostly at around $80 per barrel.

UBS analysts agreed that potential OPEC cuts would leave the oil market “in a slight deficit,” leading to “higher prices going forward.”

The bank added: “The disruptions in oil production due to the war between Israel and Hamas have been limited so far, but renewed attacks on US bases in Syria on Monday indicate continued risks of escalation, which is likely to lead to fluctuations in oil prices in the future.” .

UBS also noted that oil production fell in January, down 410,000 barrels per day compared to December among OPEC countries and that U.S. crude oil production “will likely” decline by about 300,000 barrels per day “as a result of the cold weather.”

“We continue to advise investors with a high degree of risk tolerance to sell exposure to lower Brent prices, or add exposure to longer-term Brent oil contracts,” the bank said.

(tags for translation) Daily Mail

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