On Friday, the increase in oil prices was observed despite Angola’s withdrawal from the Organization of the Petroleum Exporting Countries (OPEC). This withdrawal did not have a significant impact on the market since Angola contributes only a small fraction to OPEC’s overall output. The positive momentum in crude prices throughout the week was driven by the anticipation of supply disruptions in the Red Sea.
Although oil prices had declined on Thursday following Angola’s announcement of leaving OPEC, concerns arose about the unity of the cartel and its ability to bolster crude prices in the upcoming year through production cuts. Despite these concerns, the week was poised to end on a positive note for crude prices.
Angola’s departure from OPEC, accounting for approximately 1.1 million barrels per day (bpd) out of the group’s total production of 28 million bpd, had a limited impact on overall oil prices. The country’s exit did not significantly affect the market, as the gains on Friday largely counteracted the losses experienced in the previous session.
Looking ahead, Brazil is expected to join OPEC+ in 2024, contributing over 3 million bpd to the alliance’s production. In the current market scenario, Brent oil futures expiring in February increased by 0.5% to reach $79.85 per barrel, while West Texas Intermediate crude futures rose by the same percentage to $74.52 per barrel as of 20:46 ET (01:46 GMT).
Red Sea Tensions put Crude Prices on Course for Weekly Gain
Anticipations of limited supply played a crucial role in bolstering crude oil this week. The Red Sea witnessed attacks on vessels by the Yemeni Houthi group aligned with Iran, prompting numerous oil and shipping companies to avoid the region.
This action suggests possible interruptions in the arrival of shipments via the Suez Canal, particularly if the disturbances endure for an extended period beyond a few weeks.
Brent and WTI experienced a more than 3% increase this week, despite reports indicating talks for a ceasefire between Israel and Hamas in Egypt. The recent Houthi activities in the Red Sea are closely linked to the conflict, with the latest attacks seen as retaliation for the U.S. veto of a United Nations resolution calling for a ceasefire in the Israel-Hamas war.
US Data Offers mixed Signals, but Demand Outlook Upbeat
Crucial economic indicators from the United States provided conflicting signals to the oil markets this week. Although an unanticipated increase in inventories suggested ample supply in the largest fuel-consuming nation globally, the relatively robust GDP data indicated ongoing strong economic growth in the country.
On Thursday, there was a slight downward revision to the third-quarter U.S. GDP data, although the reading continued to indicate a healthy expansion. This contrasts with signals from other developed nations grappling with decelerating economic growth.
The GDP figures raised optimism for a “soft landing” scenario for the U.S. economy, potentially sustaining positive oil demand in the upcoming year.
Attention has now shifted to the PCE price index data, the Federal Reserve’s favored inflation metric, scheduled for later in the day. This information is eagerly awaited for further insights into the central bank’s intentions regarding the initiation of interest rate reductions in 2024.
Supportive signals from the Federal Reserve, indicating a more accommodative stance, played a pivotal role in boosting oil prices. This support allowed prices to recover from nearly five-month lows observed last week, with market optimism stemming from the expectation of lower interest rates in the upcoming year.
Despite this rebound, oil prices remained in negative territory for 2023 due to apprehensions about declining demand in other parts of the world, notably in China, a major importer.
Source: Investing.com
By. Pham Thanh Bien
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