Oil prices recently surged, recording their biggest weekly rise in two months, primarily due to Red Sea disruptions and OPEC issues.
Despite this rise, oil is heading for its first yearly decrease since 2020.
The main reason for this expected drop is the rise in oil production in countries like the United States, Brazil, and Canada.
On Friday, Brent crude, a major oil benchmark, went up by 1.2% in London. This increase brought its price to $80.35, a nearly 5% rise over the week.
The price hike happened as shipping costs soared. Many ships had to change their routes to avoid the Red Sea and Suez Canal.
These areas have become risky due to attacks by Yemen’s Houthi rebels, believed to be backed by Iran. The rebels have been targeting oil tankers and cargo ships.
The delays and extra costs of shipping oil have overshadowed Angola’s recent exit from OPEC.
Angola’s decision to leave the group exposed the fragile unity among its members.
However, experts believe this won’t greatly affect oil supply or OPEC’s plan to control prices by cutting production.
Oil’s expected annual decline is a new trend since 2020, mainly due to increased output from the U.S. and other big producers.
These countries are not part of OPEC. Their growing production makes it harder for OPEC to influence global oil prices.
Additionally, the demand for oil is not as strong as before. The International Energy Agency predicts that the growth in oil demand will slow down next year.
Concerns over the safety of ships in the Red Sea
Angola has not been actively involved in OPEC’s decisions about oil supply for a while.
Experts think OPEC’s current supply limits, set by the group and its allies, will stay the same in the coming month.
This week, fewer oil tankers, about 30, have passed through the Bab al-Mandab Strait in the Red Sea.
This number is much lower than the average in the last three weeks, showing a decrease of over 40%.
The rise in Brent futures reflects concerns over the safety of ships in the Red Sea. The Houthi rebels’ attacks on ships are seen as support for Hamas in their conflict with Israel.
This situation adds to the challenges in global trade. Another important trade route, the Panama Canal, is also facing problems due to a severe drought.
Experts from FGE, an energy consulting group, have warned that these challenges in the Red Sea might continue.
They believe the situation will persist until effective measures are taken to stop the attacks on ships