(DailyDig.com) – Fears of supply interruptions due to the continuing war in the Middle East and forecasts of China’s high holiday consumption with an economic stimulus caused oil prices to rise about 2 percent at the beginning of 2024.
Concerns that the Israel-Gaza war might escalate into a larger regional confrontation were seen as U.S. helicopters successfully defended a Maersk cargo ship in the Red Sea from an assault by Houthi rebels on December 31, according to officials from the U.S.
U.S. West Texas Intermediate oil jumped $1.04 (1.5%) to $72.69 per barrel, while Brent oil climbed $1.28 (1.7%) to $78.32 per barrel. Brent Crude is projected to hover around $82.56 per barrel in 2024, according to industry experts. This is a small growth from $82.17 in 2023. Reuters reports that experts believe oil consumption will be muted due to lackluster global growth, with the possibility of support from geopolitical concerns.
There is a growing concern that the Israel-Hamas conflict might escalate into a more widespread regional war and impede global commerce, endangering oil supplies as proxy groups supported by Iran persist in targeting commercial boats in the Red Sea.
According to Leon Li, an analyst with CMC Markets located in Shanghai, oil prices might be impacted by the high demand in China around the Lunar New Year celebrations and the Spring Festival in February.
China might introduce further stimulus policies following a third consecutive month of declining factory activity in December, potentially increasing demand for oil.
At that time, if the Middle East crisis were to spread, it might block the Gulf’s Strait of Hormuz and the Red Sea, two vital maritime channels for oil transportation. According to Reuters, tracking data indicates that some tankers are avoiding the Red Sea by taking expensive diversions around Africa. These tankers bring jet and diesel fuel from India and the Middle East to Europe.
Once again, Maersk has announced that it will halt all transportation between the Gulf of Aden and the Red Sea.
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