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Oil Could See Second Weekly Gain in a Row

Oil prices have added 4% since the start of the week and may book the second consecutive five-day trading period for the past two months.

The biggest reason for the spike is the situation in the Red Sea as cargo traffic gets diverted away from the Yemeni coast where Houthis target ships with ballistic missiles and drones.

“The tensions in the Red Sea have largely boosted prices, but that’s been countered by uncertainty over supply,” Will Sungchil Yun, senior commodities analyst at SI Securities, told Bloomberg. “While it’s more of a wait-and-see for oil now, it will be hard for prices to find support if OPEC+ output cuts come into question.”

Meanwhile, Angola dropped a bomb on OPEC with the announcement that it was leaving the group to pursue a more independent production policy. The move came as a surprise because just weeks ago Angola had said it was not considering leaving OPEC despite disagreements about production quotas.

"From an oil market supply perspective, the impact is minimal as oil production in Angola was on a downward trend and higher production would first require higher investments,” UBS’s Giovanni Staunovo told Reuters following the news.

"However, prices still fell on concern of the unity of OPEC+ as a group, but there is no indication that more heavyweights within the alliance intend to follow the path of Angola,” Staunovo also added.

Perhaps in confirmation of that lack of indication for more members leaving, prices reversed the Thursday fall on Friday morning in Asian trade with Brent hovering around $80 per barrel at the time.

Even so, oil seems to be heading for the first annual loss since 2020, Bloomberg noted in a report earlier today, as OPEC+ production cuts failed to fulfil their purpose amid record-high U.S. production and higher output in other non-OPEC producers.

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By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on December 22 2023 said:
    This is what is expected from solid market fundamentals and a robust global oil demand. If not for manipulation of the market by speculators, oil traders and also the EIA, prices would have risen higher.

    The attacks on shipping in the Red Sea have so far had a mild impact on prices but this could change immediately with a wider war in the Middle East and a blockade of the Strait of Hormuz.

    The departure of Angola from OPEC Plus has no effect on the organisation’s market dominance. Angola is a medium-sized producer whose production has been on the decline for years. Moreover, its withdrawal has been amply compensated by Brazil’s membership.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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