Despite geopolitical tensions, including a war very close to the world’s most oil-rich area and production restrictions from the largest exporters, oil prices have fallen by as much as 10 percent this year. Moreover, this marks the first annual decline in barrel value since the outbreak of the coronavirus pandemic in 2020. According to Reuters, on Friday morning, the last trading day of this year, futures contracts for Brent oil were priced at $77.48, which is 0.4 percent higher than the previous day.
For a barrel of WTI oil, the price was $71.97, up 0.3 percent. Oil prices stabilized on Friday after plunging more than three percent on Thursday following news that more shipping companies were preparing to redirect their vessels back through the Red Sea. Recall that in December, most major shipping companies suspended navigation in that part of the world due to attacks by Yemeni Houthis on vessels.
Both benchmarks will conclude this year at their lowest levels since 2020 when the pandemic outbreak slashed fuel demand and crashed oil prices. Furthermore, compared to the highest price level reached this year, both Brent and WTI oil are currently 20 percent cheaper. This only demonstrates how ineffective the decision by members of the Organization of the Petroleum Exporting Countries and Russia (OPEC+) to raise prices in the global market by reducing production quotas has been.
According to Reuters, foreign analysts believe that the anticipated reduction in interest rates, which could lead to lower borrowing costs in parts of the world that are the largest global oil consumers, could stimulate demand during 2024. One of the consequences of falling interest rates should also be a weaker dollar, which will make oil imports cheaper.
A Reuters survey of 30 economists showed that the average price of a barrel of Brent oil during 2024 could be around $84.4. In comparison, this year’s average price was $80, and following Russia’s invasion of Ukraine in early 2022, the price surged above $100.
