Oil Prices Heading for Positive Closure in First Week of 2024

International oil prices saw an upward trend on Friday, driven by heightened efforts to de-escalate tensions in the Middle East and signs of controlled inflation emerging from the Federal Reserve meeting minutes.

As of now, Brent crude is valued at $77.96 per barrel, marking a 0.67% increase for the day. Simultaneously, West Texas Intermediate crude (WTI) is trading at $72.81 per barrel, reflecting a 0.61% gain from the previous close.

The commodity is poised to conclude the initial week of 2024 in positive territory, propelled by mounting concerns over potential disruptions in the global oil supply.

Although the Federal Reserve meeting minutes did not explicitly disclose when interest rate cuts might commence, discussions indicated a growing consensus on inflation management. There is also an increasing apprehension about the potential risks associated with an "overly restrictive" monetary policy, as reported by Reuters.

Lower interest rates, if implemented, could lower consumer borrowing costs, stimulating economic growth and subsequently boosting the demand for oil.

Further contributing to supply worries are developments in the Middle East, where Israeli forces are planning a more targeted approach in the north and intensifying efforts against Hamas leaders in the south, according to the defense minister's statement on Thursday.

To curb the escalation of the conflict, Secretary of State Blinken was scheduled to embark on a week-long diplomatic mission to the Middle East on Thursday, as announced by the State Department.

Data from the U.S. Energy Information Administration revealed a significant rise in gasoline stocks last week, marking the highest week-on-week increase in over 30 years. Conversely, distillate product supplies, a demand indicator, reached their lowest level since 1999.

Despite the bearish data, geopolitical tensions, optimism regarding economic recovery through potential interest rate adjustments, and persistent shipping concerns have helped offset the negative impact.

Analyzing the situation, ING analysts noted in their Friday report, "There is still plenty of tension in the Middle East with Houthi rebels launching a sea drone in the Red Sea, a US airstrike in Baghdad."