Crude oil prices have been trading in a tight range since the start of the New Year as geopolitical tensions in the Middle East counter now chronic economic concern.
Still, benchmarks booked a decline in the first trading day of the new year as worry about the U.S. economy specifically temporarily outweighed fears of another escalation in the Red Sea.
"Energy markets were unable to escape the broader pressure seen on risk assets with equity markets also weaker. The weakness in oil comes despite a ratcheting up in tensions in the Middle East," ING’s Warren Patterson and Ewa Manthey said in a note published earlier today.
“While the geopolitical situation is a concern for the oil market, a fairly comfortable oil balance over the first half of 2024 does help to ease some of these worries,” the commodity analysts added.
The latest news in that respect was the arrival of an Iranian warship in the Red Sea over the weekend, which coincided with the latest attack by Yemen’s Houthis on a Maersk container ship, which sent a distress signal to the U.S. Navy in the area and it sank three Houthi boats.
Some reports appeared to suggest the arrival of the Iranian ship had come in response to the sinking of the boats, which resulted in the death of 10 people, but some of the coverage claims the ship entered the Red Sea a day before the attack on the Maersk ship.
Meanwhile, OPEC said it would meet in February to discuss its ongoing production cut policy with ING analysts noting that there is not more space left for additional cuts.
“Already, the last few rounds of cuts have been driven by voluntary reductions from individual members rather than group wide cuts – a sign that it is becoming more difficult to get all members on board to cut,” Patterson and Manthey wrote.
“There’s not really any disruption to the physical supply in the market” related to events in the Red Sea, Neil Beveridge, senior analyst at Sanford Bernstein, told Bloomberg. “Markets look fairly balanced coming into the year, so it leaves OPEC with quite a lot of work to do to support prices at current levels.”
By Irina Slav for Oilprice.com
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