27.12.202306:27 Forex Analysis & Reviews: Oil jumped more than 2% amid attacks on ships in the Red Sea and hopes for a rate cut.

Key Points:

• The attack on a container ship in the Red Sea has catalyzed a rise in oil prices.

• Last week witnessed a 3% increase in oil prices, underscoring the unpredictability and volatility of the market.

• Limited trading activity due to holiday closures played a role in the current price dynamics.

• Anticipation of the U.S. Federal Reserve's decisions on interest rate cuts in March 2024 adds further uncertainty to market trends.

On Tuesday, oil prices reached their highest level for the month, increasing by more than 2%. This movement was fueled by concerns about potential disruptions in maritime transport following incidents in the Red Sea, and expectations of interest rate cuts that could stimulate economic growth and fuel demand.

Specific Figures:

• Brent crude futures jumped by $2, or 2.5%, reaching $81.07 per barrel, continuing a 3.4% rise from the previous session.

• U.S. West Texas Intermediate crude increased by $2.01, or 2.7%, to $75.57.

These trends, amplified by reduced trading activity during the holidays, added to last week's 3% increase, caused by Houthi attacks on maritime vessels, raising investor concerns, and ongoing violence in the Gaza Strip.

John Kilduff from Again Capital LLC emphasized: "Today's geopolitical tension in the Middle East raises serious concerns about the safety of transporting oil and other goods."

Houthi military actions, including a missile attack on a container ship in the Red Sea and attempts to strike Israel using drones, only intensify this concern.

On the other hand, the increase in oil demand, spurred by the recovery of the global economy post-pandemic, has stimulated buyer interest. Major oil companies such as Exxon Mobil, Chevron Corp, and Occidental Petroleum have made significant investments, totaling $135 billion in 2023. ConocoPhillips has entered into two major deals in the past two years, reflecting growing interest in the oil sector.

Global oil demand over the past two years has increased by approximately 2.3 million barrels per day, reaching 101.7 million barrels. This surge in demand has significantly impacted global reserves and pricing, especially considering the limited production by OPEC and its allies.

Looking Ahead:

Analysts predict that in 2024, global oil prices will remain relatively stable, fluctuating between $70 and $90 per barrel, significantly higher than the average level of $64 per barrel in 2019. This compares with an average price of around $83 per barrel in 2023 and $99 per barrel in 2022.