Oil Holds Steady: Geopolitical Drama Fizzles Against Market Forces

24 Jan 2024 , 09:11 AM

As the market’s response to growing geopolitical risk was constrained by poor demand and a rebound in supply, oil prices saw little movement during Wednesday’s Asian trading session.

The front-month March contract for Brent crude gained 5 cents to $79.60 per barrel. The price of a barrel of U.S. West Texas Intermediate oil increased by 7 cents to $74.44.

Due to geopolitical tension, there was a 42 cent premium in the prompt-month contract for Brent crude compared to the following month, as demand for nearer-term supply increased.

Tuesday saw more strikes against Houthi forces in Yemen by a coalition of 24 countries led by the United States and the United Kingdom. Britain said in a joint statement that the strikes were intended to halt the Houthis’ onslaught on international trade.

The United States reported that since late November, Houthis supported by Iran have launched 26 strikes against commercial ships in the Red Sea, a shipping channel that was previously utilised by roughly 12% of the world’s oil commerce.

Tuesday saw additional American attacks against an Iranian-affiliated militia in Iraq after an attack on an American air base left US forces injured.

Following an early January halt due to protests, Libya’s 300,000 barrels per day Sharara oilfield began operating again on January 21.

According to the state’s pipeline authority, North Dakota, the third-largest oil-producing state in the United States, resumed some oil production following a stoppage caused by weather. However, there was still a 300,000 barrel per day (bpd) decline in output. Due to excessive cold, output has weakened by as much as 425,000 bpd by mid-January.

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