On Wednesday, the global oil market witnessed a slight price decline influenced by U.S. economic concerns. This is compounded by potential supply disruptions due to the ongoing conflicts in the Red Sea region.
Brent crude trades at $75.81 per barrel, showing a marginal decrease of 0.08 percent for the day. Meanwhile, U.S. West Texas Intermediate crude (WTI) is $70.45 per barrel. This marks a 0.13 percent fall from its previous closing.
This trend shows that oil prices are poised for the fifth daily loss.
Initial surge offset
Earlier this week, global oil prices posted a $2 increase due to maritime tensions in the Red Sea. This development heightened concerns as essential oil transport routes can potentially be blocked. However, market sentiment dampened following lower expectations of U.S. interest rate reductions.
According to ING analysts, “Energy markets were unable to escape the broader pressure seen on risk assets, with equity markets also weakening. The weakness in oil comes despite a ratcheting up in tensions in the Middle East.”
Upcoming OPEC+ Joint Ministerial Monitoring Committee (JMMC) meetings in early February will also be critical, though the exact date remains unconfirmed. As ING analysts have emphasized, the recent trend of voluntary reductions — rather than collective cuts — poses challenges for further reductions in 2024.
“Given the scale of cuts we are already seeing, it will be increasingly difficult for the group to cut more if needed over the course of 2024,” they noted.
Apart from the OPEC+ updates, industry watchers also await data from the American Petroleum Institute and the Energy Information Administration. The report from the statistical branch of the US Department of Energy is expected later this week. The release of this data, usually scheduled earlier, was postponed due to the New Year’s holiday.
Read: Oil prices seen to decline by 10 percent at year’s end
OPEC+ dictates market trend
Meanwhile, analysts at S&P Global Commodity Insights note that amid a slowing macroeconomic environment and geopolitical uncertainties, global markets continue to struggle to balance energy supply and demand.
In response, OPEC+ countries are keen to continue their oil production cuts. This is to address seasonal demand weakness and downward global oil price pressures. With the group pumping over 40 percent of the world’s oil, the analysts underscored that OPEC+ decisions substantially dictate trends in the oil market.
In its November meeting, the organization announced total production curbs of 2.2 million barrels per day (bpd) from eight producers. This includes extending voluntary cuts by Saudi Arabia and Russia, totaling 1.3 million bpd.
The additional 900,000 bpd of cuts pledged at its last meeting encompasses 200,000 bpd in fuel export reductions from Russia. The remaining adjustments were distributed among six other OPEC members. These are Iraq, the UAE, Kuwait, Algeria, Kazakhstan and Oman.
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