Oil prices fall in the second week of March as supply concerns in the Middle East ease. Due to this fact, oil companies have announced oil price cuts effective March 12, 2024. Brent and WTI crude oil ended last week on a downtrend. This was also due to Chinese data that showed weaker demand in the world’s leading oil importer. Brent crude closed last week with a 1.8% decline, although it has been holding above $82 per barrel for more than a month. US light crude WTI closed last week with a 2.5% decline. The price of WTI crude oil is currently above USD 78 per barrel.
The oil price development from the beginning of this year 2024 evolves according to current world events. The main influences on this development are the wars and also the unrest in the Red Sea. At the same time, investors seemed to overlook the geopolitical conflict, which was initially perceived as tightening global oil supplies. Tamas Varga, a commodities broker at PVM, said: “The Middle East conflict does not seem to be high on investors’ list of drivers as it has not led to a meaningful disruption in oil supply.” Also commenting on the topic, an energy and commodities market analyst with The Price Futures Group, Inc. Phil Flynn had this to say : “I think it’s: a barrel half empty or a barrel half full, depending on how you look at it,” pointing to the conflicting forces that are preventing oil prices from moving in either direction.
US crude oil inventories
Regarding US crude oil inventories, Mizuho Bank analyst Bob Yawger outlined : “Rising refinery utilization rates have the potential to deplete inventories for the first time this year.” US crude inventories have risen for six straight weeks due to low refinery rates, according to weekly data. Analysts forecast a 1.4% point rise in refinery rates after they jumped 3.4% points last week to a six-week high of 84.9% of total capacity, according to weekly government data.
Russian oil depot on fire
Also currently burning after a drone attack is a Russian oil depot in the Kursk region, located 100 km from the Ukrainian border. The oil depot in Russia’s Kursk region started burning on 10 March after a Ukrainian drone crashed on the site. The drone was shot down by an air defence system over the oil depot.
The world’s largest association of OPEC+ countries may have decided on further production cuts, but the market is banking on the fact that the negotiated limits won’t be honored as much in the end. OPEC+, the Organization of Petroleum Exporting Countries and allies such as Russia agreed in late 2023 to voluntarily cut production by 2.2 million barrels of oil for the first quarter of 2024. Saudi and Russian officials also said the cuts would prevent a first-quarter surge in oil inventories and could be extended or deepened.