Oil prices on track for their 2nd straight weekly gain on supply tensions

December 22, 2023 (MLN): Global oil prices rose on Friday, on track for their second straight weekly gain as the market focused on tensions in the Middle East following Houthi attacks on ships in the Red Sea, although Angola's decision to exit OPEC has raised uncertainties about the group's ability to effectively bolster prices.

Brent crude is currently trading at $79.54 per barrel, up by 0.54% on the day.

While West Texas Intermediate crude is trading at $74.42 per barrel, up by 0.69% on the day.

Both benchmarks have gained over 3.3% this week as investors continue to express concerns about a supply shortage.

Oil prices could see a rebound "due to the geopolitical conflicts and the imminent implementation of OPEC's production cuts," said Leon Li, an analyst at CMC Markets in Shanghai, as Reuters reported.

"So a small supply gap is likely to occur in January next year, and WTI crude oil may rise to $75-$80 per barrel," he added.

More maritime carriers are avoiding the Red Sea due to vessel attacks carried out in support of Palestinians by the Yemeni Houthi militant group, causing global trade disruptions through the Suez Canal, which handles about 12% of worldwide trade.

Germany's Hapag-Lloyd and Hong Kong's OOCL were the latest companies to say they would avoid the Red Sea by rerouting ships or suspending sailing.

The U.S. on Tuesday launched a multinational operation to safeguard commerce in the Red Sea, but the Houthis said they would continue to carry on attacks.

Analysts say the impact on oil supply so far has been limited, as the bulk of Middle East crude is exported via the Strait of Hormuz.

Capping further gains though, Angola's oil minister said on Thursday that the country's membership in the Organization of the Petroleum Exporting Countries was not serving its interests.

Angola had previously protested a decision by the wider OPEC+ group to reduce the country's oil output quota for 2024.

The Saudi-led producer group in recent months has been rallying support to deepen output cuts and boost oil prices.

Saudi Arabia, Russia and other members of OPEC+, who pump more than 40% of the world's oil, agreed to voluntary output cuts totaling about 2.2 million barrels per day (bpd) for the first quarter of 2024.

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