Oil Prices Face Uphill Battle: Oil prices faced a daunting challenge as they headed for a seventh consecutive weekly decline, grappling with concerns over a global supply surplus and sluggish demand from China. Despite the downward spiral, a modest rebound occurred on Friday following a plea from Saudi Arabia and Russia for more OPEC+ members to join in output cuts.
Brent crude futures managed a rise of $1.29, or 1.7%, reaching $75.34 a barrel. Simultaneously, U.S. West Texas Intermediate crude futures experienced a gain of $1.11, or 1.6%, reaching $70.45 a barrel. The previous session witnessed both benchmarks hitting their lowest levels since late June, signifying prevailing sentiments of oversupply in the market. Additionally, Brent and WTI found themselves in contango, where front-month prices trade at a discount to prices further out.
Analysts from Haitong Futures noted that some short sellers opted to close their positions due to the perceived oversold nature of the oil market. The notable drop in oil prices prompted OPEC+ to enhance solidarity in an effort to stabilize the market.
Saudi Arabia and Russia, being the two largest oil exporters globally, jointly urged all OPEC+ members to participate in an agreement on output cuts for the collective benefit of the global economy. This call followed a tense meeting of the producers’ club just days earlier. OPEC+ had agreed to implement combined output cuts of 2.2 million barrels per day (bpd) for the first quarter of the upcoming year.
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However, skepticism remains about the actual adherence to these commitments, with expectations that total production from OPEC+ countries might only drop by 350,000 bpd from December 2023 to January 2024. Viktor Katona, the lead crude analyst at Kpler, pointed out that some OPEC+ members may not fully comply with their commitments due to issues such as unclear quota baselines and reliance on hydrocarbon revenues.
For the week, Brent and WTI crude futures are set to record losses of 4.5% and 4.8%, respectively. Concerns persist about China’s economic situation and the surge in U.S. oil output, contributing to the market’s ongoing downturn. Chinese customs data revealed a 9% year-on-year decline in crude oil imports in November, reflecting weakened demand amid high inventory levels and economic challenges.
In India, fuel consumption in November also experienced a decline after reaching a four-month peak the previous month, influenced by reduced travel in the world’s third-largest oil consumer as festive enthusiasm waned. Meanwhile, the United States maintained oil output near record highs, surpassing 13 million bpd, as reported by the U.S. Energy Information Administration.
Our Reader’s Queries
Do oil prices go up during war?
By utilizing the event analysis method that is based on VMD decomposition, it has been discovered that the Russia-Ukraine conflict had a significant impact on the prices of crude oil. The WTI crude oil prices increased by $37.14, reaching 52.33%, while the Brent crude oil prices increased by $41.49, reaching 56.33%. This finding sheds light on the intricate relationship between geopolitical events and the global economy, particularly in the energy sector.
Will oil prices continue to climb?
While most predictions indicate that global oil prices will increase in 2024, the extent of this rise remains uncertain. This is due to the potential impact of geopolitical factors, which could outweigh typical market influences. As a result, accurately forecasting oil prices in the future is a challenging task.
Did oil prices go up during the Iraq war?
The invasion of Kuwait by Iraq caused a significant spike in oil prices, with rates soaring from $34 to around $77 per barrel. However, following a successful military operation led by the United States to remove Saddam Hussein’s Iraqi forces from Kuwait in 1991, the price of oil dropped to approximately $37.3 per barrel.
What happens to oil prices during the war during the 1980s?
The cost of crude oil skyrocketed in 1973-74, increasing by over three times its original price. Although it decreased slightly in 1975-78, it doubled again in 1979-80. However, the 1979-80 price hike was diminished between 1981 and 1985, as the price dropped by almost 40 percent. The price then plummeted in the first half of 1986, falling by more than 50 percent.