Crude Firms Friday as Markets Assess Red Sea Impacts

Oil prices are higher Friday, again supported by rising tensions in the Middle East following recent Houthi attacks on ships. Markets sold off Thursday after Angola announced it was to leave OPEC, reducing its power as a group before recovering later in the day.

• Brent FEB 24 up 0.8% at 80.01$/bbl
• WTI FEB 24 up 0.8% at 74.49$/bbl
• Gasoil JAN 24 down -0.3% at 788.5$/mt
• WTI-Brent down -0.05$/bbl at -5.51$/bbl
• Concerns over shipping have helped to reverse the overall bearish sentiment that had built up in oil markets of late over a lack of cohesion within OPEC+ after its latest meet, high non-OPEC supply and weaker demand sentiment, especially out of China.
• Crude oil and fuel tanker entering the Bab al-Mandab Strait have dropped by about 40% vs the daily average of the prior 3 weeks according to Bloomberg. Rates for vessels like Suezmax class have firmed on the situation as fleet utilisation gets tied up.
• The US claims to have launched a multinational effort to protect ships in the area but it is not clear how effective it will be.
• Brent FEB 24-MAR 24 up 0.09$/bbl at 0.32$/bbl
• Brent MAR 24-APR 24 unchanged at 0.16$/bbl
• As well as support from potential vessel diversions because of Red Sea escalations, oil markets also move closer to the new voluntary cuts set to be implemented across OPEC+ in January, though it will take time to see if group compliance is adequate.
• Saudi Arabia, Russia and other members of OPEC+ agreed to voluntary output cuts totalling about 2.2 mn bpd for the first quarter of 2024.
• Angola left OPEC+ this week after a long period of discontent over abiding by tighter quotas at a time when the country has ambitions to boost production. Its quotas were being cut against an inability to meet prior production commitments as part of the group.
• US gasoline prices are reversing recent declines, seeing multiple days of growth ahead of holiday travel. OPIS reported that US consumers were paying above what they paid at this time last year – the first time since September.
• A choppy month ahead is expected with January the lowest consumption month of the year for US gasoline demand.
• US gasoline crack down -0.7$/bbl at 16.78$/bbl
• US ULSD crack down -0.6$/bbl at 38$/bbl