In a day marked by heightened geopolitical tensions and contrasting market forces, oil prices surged, extending a series of unpredictable sessions. West Texas Intermediate (WTI) surpassed the $73 per barrel mark, propelled by a combination of escalating violence in the Red Sea and tighter US inventories set against a fragile market backdrop.
The surge in oil prices was partly attributed to fresh attacks on merchant vessels by Iran-backed Houthi rebels, adding to the ongoing unrest despite the presence of a US-led maritime force. Fortunately, no injuries or damages were reported. Analysts view these incidents as a spill-over effect from the Israel-Hamas conflict.
Further bolstering prices was the American Petroleum Institute’s (API) report indicating a 5.2 million barrel decrease in nationwide inventories last week. Additionally, Cushing inventories are anticipated to see their first decline in 12 weeks. WTI’s prompt spread shifted into a bullish backwardated structure, signaling increased demand for barrels in the immediate future.
Over the past month, crude oil has experienced significant volatility, oscillating within a roughly $5 range as traders grapple with forecasting the outlook for upcoming quarters. The turmoil in the Middle East, a shutdown of Libya’s largest oil field, and production cuts implemented by OPEC+ are contributing factors supporting prices. However, demand forecasts, such as Vitol’s cautious outlook, are tempering the bullish sentiment.
The head of Asia at the Vitol Group, a major trading entity, anticipates relatively balanced markets throughout the year. This projection is grounded in the struggle of demand growth to keep pace with new supply from sources outside OPEC+. The forecast aligns with the recent prediction by the Energy Information Administration, foreseeing a balance between supply and demand in 2024.
In conclusion, the energy market remains on edge as oil prices respond to the escalating violence in the Red Sea, emphasizing the delicate balance between geopolitical tensions and market forces influencing the future trajectory of crude oil. As oil prices continue their dance within the marketplace, influenced by nventory dynamics, and global demand considerations, traders remain on edge, navigating the uncertain terrain of the energy market.
Source: Bloomberg
