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Rise in Oil Prices
On Wednesday, oil prices witnessed an upward trend as worries over a possible expansion of the Israel-Hamas conflict escalated. This conflict intensification threatens potential obstruction to oil supplies running through the vital Red Sea region. At 09:10 ET (14:10 GMT), the US crude futures demonstrated a 1.1% increase, touching $71.12 a barrel, while the Brent contract ascended by 1.2%, hitting $76.82 a barrel.
Mounting Tension in the Red Sea
In Beirut, Lebanon's capital, the Hamas deputy leader, Saleh al-Arouri, was eliminated in a drone strike. This underlines the fact that the almost three-month-old war between Israel and Hamas is becoming increasingly regional. While Israel has remained silent on the arrest of the senior Hamas leader, it continued its offense on the Gaza Strip on Wednesday. Concurrently, Houthi rebels carried forward their attacks on vessels in the Red Sea.
The conflict's potential escalation could hinder major routes used for oil transportation, hence making the market more expensive. Nonetheless, the experts at ING have commented that despite geopolitical risks, the oil market's fairly stable balance in H1 of 2024 could allay some fears.
Upcoming U.S. Oil Inventories
The global oil balance has been influenced by record-breaking US production in the past few weeks. This has resulted in a less stringent market than earlier estimated for Q1 of 2024. The American Petroleum Institute's U.S. crude stockpiles report will be released later this Wednesday. It will be followed by official data on Thursday.
In recent weeks, a trend of continuous build-up in U.S inventories has unsettled oil markets. This is coupled with increases in gasoline and distillate inventories, signaling a decrease in fuel demand from the world's largest consumer.
OPEC+ Scheduled Meeting
In early February, the Organization of Petroleum Exporting Countries and allies, collectively known as OPEC+, will convene for a Joint Ministerial Monitoring Committee meeting, reports Bloomberg. The members are eager to discuss the oil market's current conditions.
However, considering the magnitude of already implemented cuts, ING has projected that further reductions in 2024 would be challenging. The last few cuts were facilitated by individual member nations voluntarily reducing their output. This indicates the growing challenges in unifying all members to agree to reductions, added ING.
