Crude oil futures have lost more than 10% in a turbulent 2023, with geopolitical turmoil and concerns about oil production levels from major producers around the world playing a role.
On Friday, the last trading day of the year, Brent crude fell 11 cents, or 0.14%, to settle at $77.04 per barrel. West Texas Intermediary (WT) crude fell 12 cents, or 0.17%, to settle at $71.65 a barrel.
Both contracts lost more than 10% in 2023, ending the year at their lowest year-end levels since 2020. Last year, Brent had risen by 10 percent and WTI rose by 7 percent, supported by supply concerns following Russia’s invasion of Ukraine.
Analysts predict Brent crude oil will average $82.56 in 2024 as they expect weak global growth to limit demand. This figure is lower than the consensus of $84.43 in November. However, ongoing geopolitical tensions may provide support to prices.
In these circumstances, analysts also question whether the Organization of the Petroleum Exporting Countries and its allies, or OPEC+, will be able to implement the supply cuts they have promised to increase prices.
OPEC+ is currently reducing production by about 6 million barrels per day, representing about 6% of global supply.
OPEC must take into account the weakening demand for crude oil in the first half of 2024, at a time when its global market share has fallen to its lowest level since the pandemic due to production cuts and Angola’s departure from the group.
Meanwhile, the war in the Middle East is causing concerns about potential supply disruptions that occurred in the last few months of 2023 and are expected to last into 2024. Volatility is likely to continue as we move into 2024 due to geopolitical events and fears that conflict could spread to the region.
This month, attacks by Yemen’s Houthi militant group on transport ships passing the Red Sea route have forced major companies to divert their shipments to new routes. Cargoes of diesel and jet fuel destined for Europe leave the Red Sea.
Although some companies are preparing to resume transit through the Suez Canal, some crude oil and refined product tankers are still opting for the longer route around Africa to avoid possible conflicts in the region.
Israel is intensifying its attacks in Gaza. On the last day of 2023, as Israel intensified its attacks on the south of Gaza, geopolitical tensions escalated in the Middle East and there was upward pressure on prices.
Data released Friday by the U.S. Energy Information Administration (EIA) showing strong oil demand in October provided some support to prices in intraday trading. The report stated that the total oil demand in the USA increased by 3.4% in October compared to the previous year.
U.S. crude oil production fell slightly to 13,248 million barrels per day in October, after setting monthly records in August and September.
Energy companies added oil and gas rigs this week for the first time in three weeks, Baker Hughes said in a report Friday, indicating that production could increase in the future.
