© Reuters. FILE PHOTO: A pump is seen at a gasoline station in Manhattan, New York City, U.S., August 11, 2022. REUTERS/Andrew Kelly/File Photo
By Florence Tan
SINGAPORE (Reuters) – Oil costs dipped in early commerce on Monday on sharp worth cuts by prime exporter Saudi Arabia and an increase in OPEC output, offsetting worries about escalating geopolitical tensions within the Middle East.
fell 9 cents, or 0.1%, to $78.67 a barrel by 0057 GMT, whereas U.S. West Texas Intermediate crude futures shed 10 cents, or 0.1%, to $73.71 a barrel.
Both contracts climbed greater than 2% within the first week of 2024 after buyers returned from holidays to give attention to geopolitical dangers within the Middle East following assaults by Yemeni Houthis on ships within the Red Sea.
U.S. Secretary of State Antony Blinken, who’s within the Middle East this week, warned that the Gaza battle may unfold throughout the area with out concerted peace efforts, though Israeli Prime Minister Benjamin Netanyahu vowed to proceed the struggle till Hamas was eradicated.
Offsetting the upward strain on costs from geopolitical considerations, output from the Organization of the Petroleum Exporting Countries (OPEC) rose 70,000 barrels per day (bpd) in December to 27.88 million bpd, based on a Reuters survey.
Rising provide and competitors with rival producers, prompted Saudi Arabia on Sunday to chop the February official promoting worth (OSP) of its flagship Arab Light crude to Asia to the bottom stage in 27 months.
“If we were just to focus on the fundamentals including, higher inventories, higher OPEC/non-OPEC production, and a lower than expected Saudi OSP, it would be impossible to be anything other than bearish ,” IG analyst Tony Sycamore stated.
“However, that doesn’t take into account the fact that geopolitical tensions on the Middle East are undeniably rising again which will mean limited downside.”
In the U.S., oil drilling rigs had been up by one at 501 final week, Baker Hughes stated in its weekly report.
JPMorgan forecasted 26 oil rigs to be added this 12 months, most of them within the Permian throughout the first half of the 12 months.
“The timing of drilling is paramount, as rig additions at the start of the year will contribute to 2H24 production growth,” the financial institution’s analysts stated in a be aware.
“Despite an impressive 1 mbd of crude and condensate production growth in 2023, we expect 2024 supply to increase by only 400 kbd due to lower completions activity levels vs 2023.”