In Asian trading on Wednesday, oil prices remained stable despite conflicting signals in the market. While concerns over geopolitical tensions in the Middle East supported prices at two-week highs, unexpected data indicating a build in U.S. crude stockpiles raised apprehensions about looser markets in 2024.
Crude prices witnessed a sharp rebound from nearly five-month lows as the Red Sea attacks by the Yemen-backed Houthi group created potential disruptions in Middle Eastern oil supplies. Consequently, the formation of a naval task force by the U.S. and the redirection of oil companies and shipping operators away from the Suez Canal highlighted potential delays in global fuel deliveries.
These attacks, seen as retaliation for the Israel-Gaza conflict, and the subsequent U.S. veto at the United Nations, triggered a surge in oil prices amid fears of increased supply disruptions and potential involvement of other Middle Eastern powers.
Brent oil futures for January maintained stability at $79.25 a barrel, while West Texas Intermediate crude futures saw a 0.2% rise, reaching $74.34 a barrel, trading near their two-week highs.
However, the recent uptick in oil prices faced a hurdle with data from the American Petroleum Institute (API) revealing an unexpected increase of 0.9 million barrels in U.S. crude inventories for the week ending December 15. This deviation from the anticipated draw of 2.2 million barrels suggested ample U.S. supplies as production surged to fill the void created by OPEC’s output reduction.
The API figures typically foreshadow the official inventory report scheduled later on Wednesday, expected to provide insights into U.S. fuel demand and refinery output for the close of 2023.
Despite the Federal Reserve signaling a pause in interest rate hikes and a consequent optimistic market outlook for demand in 2024, well-supplied markets are anticipated to curb substantial price surges in oil. Forecasts by investment bank Goldman Sachs project a range of $70 to $90 a barrel for Brent in 2024, acknowledging robust supply expectations alongside an anticipated recovery in China’s economy and a decline in U.S. interest rates.
Persistent concerns regarding high supply and subdued demand, particularly amid soft economic data from China, had previously pushed oil prices close to five-month lows in December. Both Brent and WTI prices are on track to conclude 2023 in negative territory.