Oil prices are set to experience the largest annual drop since 2020, despite OPEC+ production cuts and geopolitical tensions from the Israel-Hamas war. Brent crude remains above $77 a barrel, facing weekly, monthly, and quarterly losses, while West Texas Intermediate hovers near $72 a barrel.
Concerns arise as global crude supplies may surpass demand in the coming quarters. Despite OPEC+ members implementing further production cuts from January 1, 2024, increased production from non-cartel nations and worries about slowing demand growth contribute to the decline in crude futures.
The Red Sea tensions further complicate the situation, diverting container ships and lengthening voyages. The year concludes with oil prices influenced by geopolitical events and market dynamics, showcasing a challenging and tumultuous period for the industry.
Oil prices are set to end 2023 about 10% lower, the first annual decline in two years, after geopolitical concerns, production cuts and global measures to rein in inflation triggered wild fluctuations in prices.
Brent crude futures were up 48 cents, or 0.6%, at $77.63 a barrel at 0523 GMT on Friday, the last trading day of 2023, while the U.S. West Texas Intermediate (WTI) crude futures were trading 37 cents, or 0.5% higher, at $72.14.
On Friday, oil prices stabilised after falling 3% the previous day as more shipping firms prepared to transit the Red Sea route. Major firms had stopped using Red Sea routes after Yemen's Houthi militant group began targeting vessels.
Still, both benchmarks are on track to close at the lowest year-end levels since 2020, when the pandemic battered demand and sent prices nosediving.
Production cuts by the OPEC+ have proved insufficient to prop up prices, with the benchmarks declining nearly 20% from their highest level this year.
Oil's weak year-end performance contrasts with global equities, which are on track to end 2023 higher.
The MSCI equity index (.MIWD00000PUS), which tracks shares in 47 countries, is up about 20% from the beginning of the year, as investors ramp up bets on rapid-fire rate cuts from the U.S. Federal Reserve next year.
In the currency market, the dollar was rooted on the back foot and headed for a 2% decline this year after two years of strong gains.
