Crude oil prices fell at the beginning of weekly trading – today, Monday – by more than 4% compared to the close of the Friday session, amid weak global demand for crude and affected by a severe reduction in crude prices from Saudi Arabia, and an increase in the production of the Organization of the Petroleum Exporting Countries (OPEC), outweighing the impact of this. On supply concerns linked to escalating geopolitical tension in the Middle East.
By 14:40 GMT, futures contracts for Brent crude for next March delivery fell by 4.2%, equivalent to $3.38, to $75.38 per barrel, and US West Texas Intermediate crude for next February delivery fell by 4.7%, or $3.52. To reach $70.29 per barrel.
The two benchmarks had jumped by more than 2% in the first week of 2024 after investors returned from vacation to focus on geopolitical risks in the Middle East, in the wake of the Yemeni Houthi group’s threats to Israeli ships or those carrying goods for Israel and wanting to cross the Bab al-Mandab Strait and the Red Sea, Nasra. The Gaza Strip, which is subjected to aggression from the Israeli occupation for the 94th day in a row, causing the death of more than 23,000 Palestinians and the injury of about 59,000 others.
A Reuters survey revealed that OPEC production increased by 70,000 barrels per day in December to 27.88 million barrels per day, which outweighed the pressures of rising prices linked to geopolitical concerns.
The survey showed that increases in Iraq, Angola and Nigeria offset ongoing reductions by Saudi Arabia and other members of the broader OPEC+ alliance.
Increased supplies and competition from rival producers prompted Saudi Arabia – yesterday, Sunday – to reduce the official selling price of its Arab Light crude for delivery next February to Asia to the lowest level in 27 months.
The significant reduction in official oil prices by Saudi Arabia reinforced signs of weakness in the global oil demand market in major markets, led by China.
Saudi Arabia is the largest exporter of crude oil in the world with a daily average of 6.6 million barrels, compared to 7.5 million barrels per day in normal circumstances, but the Kingdom participates in the OPEC Plus alliance agreement to reduce production.
Last year, oil recorded its first annual loss since 2020 as production expanded from outside OPEC Plus and traders looked to slowing demand growth, including from the main importer (China).
Analysts at Wall Street investment banks expect continued unfavorable conditions in the oil market, which has led them to lower their price forecasts.
For his part, Warren Patterson, head of the commodities sector at the Dutch banking group ING, said, “The supply disruptions and tension in the Middle East still continue to provide some support to prices… In the absence of tensions in the Middle East, we doubt that a significant increase will occur.” In prices in light of the state of market equilibrium during the first half of 2024.”
