Oil reports biggest weekly gain in 2 months on Red Sea attacks, Angola output forecast; Brent settles at $79/bbl

Brent futures fell 32 cents, or 0.4 per cent, to settle at $79.07 a barrel, while US West Texas Intermediate (WTI) crude fell 33 cents, or 0.5 per cent, to settle at $73.56, according to news agency Reuters. This left both benchmarks up about three per cent for the week after gaining less than one per cent last week.

Also Read: Year 2023 | From $82 to near $100 and back: How Brent crude moved in 2023 over OPEC+ cuts and more

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a January 19 expiry, settled higher by 0.02 per cent at ₹6,164 per bbl, having swung between ₹6,126 and ₹6,247 per bbl during the session, against a previous close of ₹6,163 per barrel.

What’s driving crude oil prices?

-Crude is headed for its first annual drop since 2020 as surging production from the US and elsewhere counters efforts by the OPEC cartel to support prices through output cuts. The outlook for demand is also fragile, with the International Energy Agency forecasting that growth will slow sharply next year.

-So far this week, only about 30 tankers, including crude oil and fuel carriers, have entered the Bab al-Mandab Strait at the southern end of the Red Sea, according to vessel-tracking data compiled by Bloomberg.

-In the Middle East, more maritime carriers said they were avoiding the Red Sea due to attacks on vessels carried out by the Iranian-backed Houthi militant group, which says it is responding to Israel’s war in Gaza. Major shippers such as Maersk said they would impose extra charges linked to re-routing ships.

Also Read: Angola’s OPEC exit opens way for more Chinese investment

-The attacks have caused disruptions through the Suez Canal, which handles about 12 per cent of world trade. In Iraq, oil ministry spokesman Asim Jihad affirmed Iraq’s support for the OPEC agreement and its commitment to voluntary oil cuts.

-In Africa, Angola’s decision to leave the OPEC cartel could open the way for Beijing to increase investment in the country’s oil and other sectors. Angola produces about 1.1 million barrels per day of oil.

-The US inflation data and Houthi attacks in the Red Sea should be more supportive of oil prices than any future increase in output from Angola, according to analysts.

-In the US, a key inflation reading came in softer than expected, boosting investor optimism that the US Federal Reserve would lower borrowing costs next year. Lower interest rates cut consumer borrowing costs, which can boost economic growth and demand for oil.

-Expectations that the Fed is more likely to cut interest rates next year also helped reduce the US dollar to its lowest since July against a basket of other currencies for a second day in a row. A weaker dollar can boost oil demand by making the fuel more expensive for buyers using other currencies.

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!

Published: 23 Dec 2023, 07:33 PM IST