Oil prices edge up as geopolitical tensions in Middle East mount

Business a.m

Oil prices saw a slight increase on Tuesday, with uncertainty surrounding the ongoing conflict in the Middle East keeping the market on edge. 

The global benchmark, Brent crude, was up by 54 cents to $82.54 a barrel, while the U.S. benchmark, WTI crude, was up by 50 cents to $77.42 a barrel. This follows Saudi Arabia’s state oil company, Aramco, beginning to trade WTI on the Saudi Energy Exchange, marking a shift from the Brent crude-dominated oil market.

The ongoing conflict in the Middle East has been a major driver of oil prices, with analysts predicting that any escalation of the violence could have a significant impact on global supplies. The meeting of officials from the U.S., Egypt, Israel, and Qatar is being seen as a positive step towards de-escalating the conflict, but there is still uncertainty about how successful the talks will be.

As John Evans of oil broker PVM noted, “oil prices have been numbed into submission by what has transpired, or not, in the Middle East.”

“One “untoward act, missile or sudden peace agreement and crude prices will move $10/barrel,” he added.

The Houthis, a rebel group based in Yemen and backed by Iran, have continued their attacks in the Red Sea, claiming to act in solidarity with Palestinians and targeting ships with commercial ties to the U.S., Britain, and Israel. The Houthis have stepped up their attacks since November of last year, and their actions have threatened to disrupt vital trade routes and further escalate tensions in the region.

Meanwhile, the Organisation of the Petroleum Exporting Countries (OPEC), has maintained its forecast for relatively strong growth in global oil demand in 2024 and 2025, despite the ongoing conflict in the Middle East. 

In its monthly report, OPEC noted that it expects world oil demand to rise by 2.25 million barrels per day (bpd) in 2024 and 1.85 million bpd in 2025, unchanged from its previous forecast.

OPEC sees a positive trend for global economic growth extending into the first half of 2024, and as a result, it has raised its economic growth forecasts for 2024 and 2025 by 0.1 percentage points.

In line with the voluntary production cuts agreed upon by the OPEC+ alliance, the organisation’s oil production fell by 350,000 bpd in January. This reduction was driven by declines in production from several members of the organisation.