Crude prices spiked more than 4% before ebbing somewhat after the allies launched deadly strikes following weeks of disruptive rebel attacks on Red Sea shipping
Analysts: oil prices are likely to remain around current levels this year.
OPEC+ producers now have sufficient spare capacity to potentially counter extreme market tightness and disruptions to oil flows that could result from geopolitical risks in the Middle East.
As of November 2023, the OPEC+ alliance held 5.1 million barrels per day (bpd) of spare oil production capacity—or about 5% of global demand.
National average gasoline prices rose 0.6 cents from a week ago, hitting $3.04 on Sunday.
The national average price for diesel in the U.S. has seen a 2-cent drop in the last week, now at $3.89 per gallon.
GasBuddy: the escalating situation in the Red Sea created significant volatility.
Barclays lowered its Brent crude prices forecast for this year by $8 to $85 per barrel due to higher supply, but noted that oil looks undervalued.
Barclays in a note on Thursday said the cut in forecasts is primarily due to “a higher starting point for inventories and a potentially longer path to OPEC spare capacity normalization.”
Oil prices rose on Thursday after an oil tanker was boarded by an armed group in Oman, raising the prospect of escalating conflict in the Middle East.
February WTI crude oil (CLG24) on Thursday closed up +0.65 (+0.91%), and Feb RBOB gasoline (RBG24) closed up +4.70 (+2.27%).
The Gold for Oil (G4O) program emerged in response to the 1973 oil crisis, triggered by an oil embargo imposed by OPEC members, particularly Saudi Arabia, on nations perceived as supporting Israel in the Yom Kippur War (Birjandi, 2003). This crisis caused a global energy shortage and a surge in oil prices, prompting negotiations between oil-producing and importing countries to exchange oil for gold instead of conventional fiat currencies, allowing oil exporters to accumulate gold reserves (Falola & Genova, 2005).
A new crisis is brewing in one of the world’s trade arteries, threatening to snarl supply chains and push up oil prices and broader inflation at a time of slowing economic growth.
Increased distillate production and slowing economic activities have led to rising diesel stocks and falling prices.
Weak manufacturing activity in the U.S. and Europe contributes to reduced diesel demand, easing the market.
Geopolitical tensions near the Red Sea present potential disruptions, threatening to impact diesel supply chains and market stability.
Top U.S. banks forecast a median Brent price of $85 for 2024, citing demand growth and potential supply disruptions.
Goldman Sachs revised its forecast to $70-$90 per barrel, while Citigroup predicts an average price of $75, factoring in slower demand growth and higher U.S. output.
The global oil market outlook for 2024 is largely bearish, but increased demand, especially from Asia, could lead to higher prices.