Oil prices weakened on Wednesday after posting steep gains, as energy markets factored in US economic concerns and possible supply disruptions from the continued crisis in the Red Sea.
Global benchmark Brent crude oil futures fell 0.46% to $75.54 per barrel, while the US benchmark West Texas Intermediate (WTI) crude futures dropped 0.63% to $69.94 per barrel.
Prices of crude had increased about $2 earlier in the week as tensions in the Red Sea escalated after the US Navy’s weekend attacks on the ships of the Yemeni militant group Houthi and the reported deployment of Iran’s Alborz warship in the area on Monday.
The prospect of a broader fight risks closing critical waterways for shipping oil and disrupting trade flows.
However, markets faltered in the prior session as confidence over the potential of the Federal Reserve’s early, aggressive interest rate reduction waned ahead of the central bank’s minutes of its December meeting and the US jobs data.
Oil markets were impacted by broader pressure observed on risk assets, with stock markets also in the red. The slide also came despite the growing conflict in the Middle East.
Analysts Look to OPEC+’s JMMC Meeting for Cues
Crude prices have been kept in check ahead of the Organization of the Petroleum Exporting CountriesCountries’ (OPEC) Joint Ministerial Monitoring Committee (JMMC) meeting in February, as a sufficient oil supply is expected to be seen in the first half of this year.
Three sources from the committee said a specific date for the meeting has yet to be determined.
The current geopolitical situation poses a concern for the market, although a relatively comfortable oil balance in the first half of 2024 would help reduce some of the uncertainties, according to analysts.
The OPEC and its allies led by Russia (OPEC+) might struggle to make additional cuts should the need arise in 2024, considering the extent of current reductions, which have been fueled by voluntary cuts instead of one led by the group.
The OPEC+ agreed at its last meeting in November to voluntary output reductions of 2.2 million barrels per day (bpd) in the current quarter, headed by Saudi Arabia maintaining its existing voluntary cut.
On the inventory data front, the American Petroleum Institute (API) is set to publish its data later in the day, while a reading from the Energy Information Administration (EIA), which has been delayed due to New Year’s holiday on Monday, is due on Thursday.
