Red Sea Crisis Is Tightening Oil Markets

Disruptions to shipping in the Red Sea and via the Suez Canal are raising the prices of African and U.S. crude grades.
Brent crude sees stronger backwardation.
Analysts expect drawdowns in global stocks this month and next to support oil prices.

Oil Markets Are Much Tighter Than Oil Prices Suggest

According to StanChart, the global oil surplus we are currently witnessing is due to seasonal weakness in the month of January.
StanChart notes that there’s been a January inventory draw in only three years since 2004, with the first month of the year averaging a build of 1.2 million barrels per day.
StanChart has predicted that this surplus is transitory and will flip into a 1.6 mb/d deficit in February.

Are Oil Markets Underpricing Geopolitical Risks?

Oil prices have gained some upward momentum in the last week, driven by geopolitical tensions and inventory drawdowns.
Analysts continue to debate just how serious the geopolitical risks are and whether spare capacity and new production will be able to counter supply issues.
Seasonal shifts in demand, coupled with anticipated interest rate cuts, look set to push oil prices higher in the near future.