December 30, 2023 [Businessinsider]- Oil prices jumped on Tuesday, adding to last week’s strong gains as traders keep an eye on turmoil in the Middle East and assess the outlook for global growth and crude demand heading into 2024.
West Texas Intermediate crude popped 2.8% to $75.65 a barrel, while Brent prices reached $81.14 a barrel, up by about 2.6%. That adds to last week’s gains of 3% for both oil benchmarks.
Energy markets are watching for more potential disruptions stemming from Houthi attacks on key cargo routes. Danish shipping giant Maersk said this weekend it would start up operations again in the Red Sea and the Gulf of Aden after suspending traffic through the key waterways. A multi-national naval operation led by the US has been launched to protect ships passing through the region.
The tensions in the highly important area around the Suez Canal add to fears of regional escalation of the ongoing Israel-Hamas conflict. The war, now in its third month, could drag in other regional players like Iran, while groups like Yemen’s Houthis and Lebanon-based Hezbollah have already been lobbing rockets toward Israel.
Oil prices are also getting a boost from the outlook for a soft landing or just a mild recession in 2024. Demand should stay high, experts say, as the US avoids a severe slowdown and the Federal Reserve gets ready to cut interest rates, further stimulating economic activity potentially.
While the International Energy Agency has said that it expects fossil fuel demand to decline through this decade, markets don’t seem to agree. JPMorgan’s top energy strategist said this month that peak oil won’t be seen in our lifetime, while a wave of oil mega-mergers and skyrocketing US production point to strong demand for years to come.
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