Oil Market Roiled: In a surprising turn, oil prices experience a nearly 1% surge in Asian trade, driven by lower Russian exports and escalating tensions in the Red Sea. Brent crude futures rose by 0.4%, reaching $76.87 a barrel, while U.S. West Texas Intermediate crude saw a 0.5% increase, hitting $71.77 a barrel.
The unexpected bad weather in Russia and Houthi attacks near Yemen played crucial roles in this morning’s market dynamics, according to IG analyst Tony Sycamore. Moscow’s decision to deepen oil export cuts ahead of schedule, coupled with disruptions in the Suez Canal, contributes to the optimism.
Over the weekend, major shipping firms, including MSC and A.P. Moller-Maersk, opted to steer clear of the Suez Canal due to intensified Houthi attacks on commercial vessels in the Red Sea. The Bab al-Mandab route, vital for global commodity shipments, especially crude oil, faces increased risks. The recent events follow Russia’s suspension of a significant portion of its main export grade, Urals crude, due to a storm and maintenance.
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Last week’s dovish Federal Reserve meeting added to the positive sentiment in the oil market, eliminating concerns of a hard landing for the U.S. economy and supporting crude oil demand. According to Sycamore, the technical outlook also favors a recovery, potentially reaching the $76/78 range for WTI prices.
The weakened dollar and larger-than-expected U.S. inventory data further contributed to the oil price rally. A softer dollar makes dollar-denominated oil more attractive to foreign buyers. Analysts note that Cushing inventories, the top U.S. storage hub, rebounded in the past month after nearing operational lows.
Improved pricing at the hub attracted barrels from Texas’ Permian basin and increased Canadian crude flows, leading to eight consecutive weeks of rising Cushing inventories, reaching 30.8 million barrels. The geopolitical landscape and supply disruptions continue to shape the volatile oil market.
Our Reader’s Queries
What is causing the spike in oil prices?
The demand for fuel is on the rise as travel rebounds from the COVID-19 pandemic. A strong U.S. economy is driving up the demand and price of oil, while China and Europe’s weak growth is having the opposite effect. This poses a big question for the industry.
Why is oil price crashing?
The recent drop in US and Brent crude oil prices to $69 and $74 a barrel, respectively, can be attributed to the combination of uncertain demand and the booming production in the US.
Will oil price reach $100?
Goldman Sachs’ Asset & Wealth Management Investment Strategy Group (ISG) predicts that the price of oil will hover between $70 and $100 per barrel throughout 2024.
What is the prediction for oil prices?
Using algorithm-based (AI) technology, experts predict that oil prices will reach 78.05 in the next 12 months. According to Long Forecast, Brent Oil is expected to close at 82.96 by 2024, with a maximum price of 90.79 in July. Meanwhile, WTI is predicted to close at 74.08 by 2024, with a maximum price of 82.97 in July. These forecasts provide valuable insights for investors and businesses in the oil industry.