Published on Monday, February 26, 2024

Global | Oil price, possible tailwinds

The oil market remains at the center of the global spotlight. This has been the case for some months now due to the outbreak of the war between Israel and Hamas, a confrontation reminiscent of the most difficult moments of the oil market in the 1970s.

Key points

  • Key points:
  • Currently, tensions stem from attacks around the Bab-el-Mandeb strait, a vital route for goods passing between Asia and Europe through the Suez Canal, by Houthi rebels on commercial and military targets, and the response of the United States and the United Kingdom.
  • The implication has been the need to reroute trade through South Africa which has significant time and monetary costs, leading to a more than 100% increase in shipping freights on that route compared to the end of 2023.
  • This tension also has an impact on the price of oil, with Brent crude up USD $6.4 per barrel so far this year, considering that 10% of the oil transported by sea passes through the Suez Canal.
  • Moving forward, geopolitical issues are compounded by OPEC+'s announcement to maintain supply-limiting production restrictions and Saudi Arabia's voluntary and unilateral production cut.
  • Thus, we expect this year's average Brent oil price to be very similar to that observed in 2023, at around US$82.4 per barrel. But if the risks materialize, it could face upward pressure.

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