Oil prices are set to end the year down 10 percent due to concerns about demand

As 2023 comes to a close, oil prices are poised to mark their first annual decline in two years, experiencing a roughly ten percent drop. Geopolitical concerns, production cuts, and global efforts to curb inflation have contributed to significant price fluctuations throughout the year.

Current Oil Prices: Brent crude futures saw a modest increase of 0.4 percent, rising to $77.48 per barrel, while US West Texas Intermediate crude futures edged up by 0.3 percent to $71.97. Despite this stabilization, both benchmarks are on track to conclude the year at their lowest end-of-year levels since 2020.

Factors Contributing to Decline:

1. Geopolitical Concerns: Ongoing geopolitical tensions, especially in the Red Sea region with Houthi attacks targeting ships, have impacted shipping routes and heightened uncertainty.
2. Production Cuts by OPEC+: Despite production cuts by the OPEC+ alliance, the measures have not been sufficient to provide sustained support to oil prices.
3. Global Measures to Curb Inflation: Efforts to curb inflation globally have influenced market dynamics and contributed to oil price fluctuations.

Contrast with Global Stocks: In contrast to the weak performance of oil prices, global stocks are set to end 2023 on a positive note, underlining the divergent trends in financial markets.

Impact of Weak Dollar: The weakening of the US dollar, heading for a 2 percent decline this year after two years of gains, is expected to have implications for oil demand. A potential interest rate cut, reducing borrowing costs, and a weaker dollar may contribute to increased demand in key consumption areas.

Outlook for 2024: Analysts project an average price of $84.43 per barrel for Brent crude in 2024, anticipating a potential rebound from the average of around $80 per barrel in 2023. This outlook considers the influence of expected interest rate cuts and a weaker dollar, factors that may shape the oil market in the coming year.

Conclusion: As oil prices navigate challenges posed by geopolitical events and global economic dynamics, the year-end decline underscores the complexities within the energy market. The outlook for 2024 remains influenced by factors such as interest rates, currency movements, and ongoing geopolitical developments, highlighting the need for vigilance in assessing future trends in the oil sector.