Oil prices fall 1%… Brent crude is below $78

Monday, January 8, 2024 Oil prices fell more than 1% during today's trade, as fears of a crude supply disruption somewhat dissipated.

Saudi Arabia, the world's biggest oil exporter, announced big price cuts to its customers in Asia, the United States and Europe as OPEC boosted production, allaying fears of rising geopolitical tensions in the Middle East.

Oil prices ended trading up about 2% on Friday, Jan. 5, posting weekly gains amid expectations that demand will rebound in the new year.

Oil price today

By 07:04 AM GMT (10:04 AM Mecca Time), Brent crude futures for March 2024 delivery fell 1.16% to $77.85 a barrel.

Meanwhile, U.S. West Texas Intermediate crude futures for delivery in February 2024 fell 1.31% to $72.84 a barrel, according to data reviewed by a specialized energy site.

Two major crudes (Brent and West Texas Intermediate) gained around 2.2% and 3% respectively last week amid fears of supply shortages amid geopolitical tensions in the Red Sea.

Oil price analysis

Saudi Aramco's cut in official selling prices for February reinforces weak demand,” said Vandana Hari, founder of oil market analysis firm Vanda Insights.

An oil storage platform in Japan – Photo from Reuters

Aramco cut the official selling price for Arab light crude to Asia by $1.50 a barrel above the Oman/Dubai Sultanate average, down $2 from this January price, a 27-month low.

IG analyst Tony Sycamore said: “Focusing only on the fundamentals, including rising inventories, rising OPEC and non-OPEC production, and a lower-than-expected Saudi official selling price, there's no other way to go but oil.” Crude oil is going down.

“However, this does not take into account the fact that geopolitical tensions in the Middle East are undoubtedly escalating again, meaning limited resilience,” he added. Reuters.

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Geopolitical tensions

Both contracts rose more than 2% in the first week of 2024 after investors returned from vacation to focus on geopolitical risks in the Middle East following Yemeni Houthi attacks on ships in the Red Sea.

US Secretary of State Anthony Blinken, who is in the Middle East this week, said the war in Gaza could spread across the region without a concerted peace effort.

OPEC production rose by 70,000 barrels a day to 27.88 million barrels a day in December, facing upward pressure on prices from geopolitical concerns, according to a Reuters poll.

“Tensions in the Red Sea, though relatively weak and intermittent, are the only counterweight to crude oil prices capitulating to expectations of waning global demand and rising inventories,” said Vandana Hari.

Separately, oil rigs in the U.S. rose by one to 501 last week, Baker Hughes said in its weekly report.

JPMorgan expects to add 26 oil rigs this year, most of them in the Permian Basin in the first half of the year.

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