Market Drivers
- West Texas Intermediate crude for February delivery rose 0.7% to $72.68 a barrel, on track for a 1.4% weekly gain.
- March Brent crude, the global benchmark, increased by 0.4% to $77.89 a barrel, heading for a weekly rise of 1.1%.
Crude Gains Amidst Rising Geopolitical Concerns
Crude oil prices are set to finish the first week of 2024 on a positive note, following a challenging year in 2023 marked by demand concerns and increased production from the US and other OPEC+ nations. The recent attacks on shipping in the Red Sea by Iran-backed Houthi rebels in Yemen have raised fears of a broader conflict, potentially impacting crude flows from the Middle East. This scenario has led to a shift in shipping routes and an increased demand for US crude, consequently driving up exports.
According to Carsten Fritsch, a commodity analyst at Commerzbank, the unlikelihood of a rapid de-escalation suggests that oil prices will remain well supported in the near term.
Additionally, the recent shutdown of Libya’s largest oil field due to protests has provided further support to prices. The output at the field is estimated to be around 270,000 barrels per day.
However, concerns about demand persist. Crude prices experienced a decline on Thursday after government data revealed a substantial increase in US gasoline and distillate inventories. Gasoline inventories rose by 10.9 million barrels, while distillate stockpiles increased by 10.1 million barrels last week, surpassing analysts’ expectations.