2024-02-29 01:00:42
The Middle East is witnessing rising geopolitical tensions, especially in the Red Sea. However, crude oil prices have moved modestly so far, while European natural gas prices have fallen to their lowest levels in three years. So why are markets not responding to the tensions witnessed?
Oil prices.. Are they affected by the Red Sea tensions?
Ahmed Moaty, CEO of VI Markets in Egypt, said in special statements to “CNN Al-Eqtisadiah” that there are several reasons, the most important of which is that the United States has become the largest oil producer in the world following its production exceeded a record of more than 13 million barrels per day. At the same time, demand decreased.
He added, “We are facing a scenario of an increase in production with a decline in demand, in addition to a recession hitting the largest economies in the world, as we see a technical recession occurring in Britain and Japan, in addition to a very significant slowdown in the Chinese economy due to the real estate crisis.”
This opinion is in line with what the International Energy Agency indicated in its latest report regarding a decline in expectations for growth in demand for crude oil in 2024, compared to the previous year, in contradiction to the expectations indicated by the Organization of the Petroleum Exporting Countries (OPEC).
The International Energy Agency believes that the expected slowdown in demand growth in 2024 is a result of the economies’ complete recovery from the Corona pandemic, as well as the lackluster economic growth in major economies, and the increasing trend towards clean energy sources globally.
At the same time, the International Energy Agency expects global oil supplies to rise by 1.5 million barrels per day to a new record high, at 103.5 million barrels per day in 2024, supported by record production from the United States, Brazil, Guyana and Canada.
Strong oil production from the United States
Recent data reveal to us that the United States is pumping oil at an astonishing pace into global markets, and is on its way to producing larger quantities of oil than any country has produced in history.
The United States currently exports the same amount of crude oil, refined products, and natural gas liquids as Saudi Arabia or Russia, according to a report published by S&P Global Comedy Insights.
The latest data from the US Energy Information Administration for the week ending February 23 showed that US oil stocks rose by 4.2 million barrels from the previous week, excluding the Strategic Petroleum Reserve, which reinforced downward pressure on prices as the end of this month approached.
The Energy Information Administration also said in its forecasts in early February that US crude oil production would rise to 13.21 million barrels per day this year, which would balance concerns related to a shortage of supplies in the Middle East as a result of geopolitical tensions.
The end of the gas crisis in Europe is near
The price of European gas fell to its lowest levels since 2021, before Russia began to reduce supplies, raising market hopes that the energy crisis that has gripped the region over the past three years may be coming to an end.
Ahmed Moati believes that the European Union countries have begun to recover from dependence on Russian gas, and have found other markets from which to obtain their gas needs, including the United States and Qatar, which has allayed fears related to the lack of Russian supplies.
Strong LNG imports, warm weather and lower demand as a result of rising prices in recent years helped keep gas stored in underground storage facilities in the European Union at historically high levels this winter, putting pressure on prices.
Natural gas futures prices in the Netherlands – the main barometer in Europe – fell to a low of 22.53 euros per megawatt hour earlier this month, the lowest level since May 2021, before recovering slightly with the reemergence of tensions in the Red Sea and the continuation of… Houthi attacks.
Predictions for 2024 in light of geopolitical tensions
Fitch Ratings believes that rising geopolitical risks, including recent shipping disruptions, will keep oil prices higher.
But it indicated that without fundamental disruptions in actual oil production, or a broader escalation of attacks on the most vital oil transportation routes in the region, it does not expect a strong rise in the price of Brent crude above $80 per barrel over the course of 2024, thanks to the reserves possessed by the Organization. OPEC+.
In this regard, Ahmed Moati, a global markets expert, expected that prices would not be significantly affected by the current tensions, due to the United States’ focus on reducing the inflation rate, which may push it to pump more oil into the markets, which in turn puts pressure on oil prices.
Accordingly, Moati expected the price of crude oil to move in a horizontal range between $70 and $90 per barrel, ruling out strong rises above $100 per barrel this year, unless geopolitical tensions worsen further.
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