Crude Oil Jumps as Geopolitical Tensions Persist

February 22, 2024
crude oil production

By Adedapo Adesanya

Crude oil appreciated on Wednesday as geopolitical tensions continued in the Middle East and traders assessed signs of near-term supply tightness.

Brent crude was up by 69 cents or 0.8 per cent to $83.03 a barrel while the US West Texas Intermediate (WTI) crude jumped by 87 cents or 1.1 per cent to settle at $77.91 per barrel.

Houthi attacks on commercial vessels in the Red Sea and Bab al-Mandab strait have continued to stoke concerns over freight flows through the critical waterway.

The Iran-aligned Yemeni Houthis have carried out repeated drone and missile strikes since November in the Red Sea and Bab al-Mandab Strait, saying they are acting in solidarity with Palestinians in the Gaza war.

The Gaza conflict has spilled over into other parts of the Middle East. Lebanon’s Iran-aligned Hezbollah has traded fire with Israeli troops along the border, and Iraqi-armed groups have attacked US forces in Iraq.

US and British forces have responded with multiple strikes on Houthi facilities but have so far failed to halt the attacks.

Also, the US Federal Reserve is concerned about cutting rates too soon, minutes of its January policy meeting showed.

Concerns that rate cuts by the US central bank could take longer than thought have been weighing on the outlook for oil demand.

US inflation data last week pushed back expectations for an imminent start to the Federal Reserve’s easing cycle.

Crude oil inventories in the US rose this week, by 7.168 million barrels for the week ending February 16, according to the American Petroleum Institute (API), after analysts predicted a build of 4.298 million barrels.

The API reported an 8.52-million-barrel rise in crude inventories in the week prior.

Official data from the Energy Information Administration (EIA) is due Thursday, delayed a day by Monday’s President’s Day holiday in the US.

According to analysts at Deutsche Bank, seasonal strengthening of demand in the second half is set to push the price of Brent Crude to $88 per barrel by the end of 2024, spurred by continued discipline from the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ in a nearly balanced market for the first half of the year.

“The first possibility of relaxation of OPEC+ supply cuts will be in Q3 against a backdrop of tighter balances and higher prices, underpinned by seasonal strength,” the bank’s analysts wrote.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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