Investing.com-- Oil prices kept to a tight range in holiday-thinned Asian trade on Tuesday, as markets weighed the prospect of continued supply disruptions in the Red Sea (NYSE:SE) against fears of higher production in 2024.
Crude prices saw some strength over the past week as attacks by the Iran-aligned, Yemeni Houthi group on vessels in the Red Sea disrupted shipping routes in the region, pointing to some potential delays in oil deliveries through the Suez Canal.
But further gains in oil prices were held back by the prospect of higher production in 2024, as Angola left the Organization of Petroleum Exporting Countries (OPEC) on disagreements over recent production cuts. The African nation is now expected to increase output in the coming year.
U.S. production was also seen at record highs in December, as the country stepped in to fill an output gap left by recent production cuts from the OPEC. High U.S. production, coupled with largely underwhelming cuts from the OPEC, pushed up concerns over oversupplied oil markets in 2024, presenting a weak outlook for prices.
Brent oil futures expiring in February fell 0.4% to $79.04 a barrel, while West Texas Intermediate crude futures were flat at $73.76 a barrel by 20:15 ET (01:15 GMT). Trading volumes were limited with Christmas holidays in several major markets.
Oil prices set for steep losses in 2023 as demand fears persist
Brent and WTI prices were set to lose around 8% each in 2023, as a string of production cuts from the OPEC did little to offset persistent concerns over worsening crude demand.
A post-COVID recovery in top oil importer China largely failed to materialize this year, while major euro zone economies slipped into recession amid high inflation and tighter monetary conditions.
While the U.S. economy largely bucked this trend, markets remained unsure whether steady demand in the world’s largest fuel consumer would be sufficient to offset a decline in global consumption.
Recent weakness in the dollar offered some respite to oil prices, as data showed that inflation was cooling steadily in the U.S.. The trend is expected to attract interest rate cuts by the Federal Reserve in 2024, although the timing of such a move remains uncertain.