Global oil prices have recently stabilized after a significant drop. Now, Brent crude oil is priced at $76.15 per barrel, marking a decrease of 0.02 percent. Meanwhile, West Texas Intermediate (WTI) crude at $70.97 per barrel, down 0.09 percent from its last closing price.
This stabilization in global oil prices is primarily due to Saudi Arabia’s recent decision to cut oil prices. Apart from this, there is also an increase in oil output from members of the Organization of the Petroleum Exporting Countries (OPEC), such as Iraq and Nigeria.
The previous session saw both benchmarks dip by over 3 percent.
Oil price and supply concerns
OPEC increased its oil production in December. The member states collectively pumped 27.88 million barrels per day (bpd), representing an increase of 70,000 bpd from November. However, this output is still down by more than 1 million bpd compared to the same month a year ago.
This increase in production comes just before anticipated further cuts by the broader OPEC+ in 2024. Additionally, Angola’s exit from OPEC is expected to lower its output and market share starting from January.
Read: Oil prices recover following Angola’s exit from OPEC
Leon Li, an analyst at CMC Markets, highlighted that “Saudi Arabia’s sharp price cuts and OPEC’s increased production have offset supply concerns caused by escalating geopolitical tensions in the Middle East.” These tensions could potentially impact global oil supplies through 2024.
Meanwhile, as stated by Saxo Bank in its weekly MENA report, Saudi Arabia’s greater-than-expected price cuts are also raising concerns about the oil demand. It has shifted the focus to potential production cuts by OPEC and its allies.
Recently, Maersk, a leading shipping company, has also decided to reroute its vessels from the Red Sea due to increasing supply risks. This move aligns with the period when Saudi Arabia made unexpected and significant cuts in oil prices.
How markets are performing
In the broader commodities market, copper prices fell by 3 percent over the week, and investors are now looking toward China’s inflation data and the US Consumer Price Index (CPI) as possible influencers of future market trends. Gold prices also ended the week lower.
The equities market reflects these global trends, with the Hang Seng Index in Hong Kong experiencing a 0.7 percent decline. Conversely, Chinese oil and gas, natural gas distribution and telecommunications sectors registered gains last Friday despite the mainland’s CSI 300 Index experiencing a 0.5 percent decline.
The global financial landscape is further affected by the volatility of US Treasury yields, influenced by mixed signals from US Non-Farm Payrolls (NFP) and Institute for Supply Management (ISM) data. Despite these uncertainties, the stock market saw modest gains, including indices such as the S&P 500 and Nasdaq 100.
Analysts generally expect global oil prices to oscillate between $75 and $80 per barrel in the short term, subject to developments in the Middle East conflict.
For more markets news, click here.
