Oil prices are anticipated to conclude 2023 roughly 10% lower, marking a reversal after two years of gains. Geopolitical concerns, production cuts, and central bank measures to control inflation have led to significant price fluctuations.

Despite a 3% drop the previous day, oil prices climbed on Friday as more shipping firms prepared to transit the Red Sea route. Brent crude futures were up at $77.87 a barrel, while U.S. West Texas Intermediate (WTI) crude futures stood at $72.53.

However, these benchmarks are on course to record their lowest year-end levels since 2020, when the pandemic drastically impacted demand and caused prices to plummet. Production cuts by the Organization of the Petroleum Exporting Countries and allies (OPEC+) have not been sufficient to support prices, and the benchmarks are down nearly 20% from the year’s highs.

OPEC+ is currently implementing output cuts of around six million barrels per day, representing approximately 6% of global supply. OPEC faces declining demand for its crude in the first half of 2024, coinciding with a reduction in its global market share due to output cuts and Angola’s departure from the group.

Analysts predict that Brent crude will average $82.56 in 2024, a decrease from the November consensus of $84.43. This projection reflects expectations of weak global growth capping demand, despite potential support from geopolitical tensions.

[custom-related-posts title=”Related Posts” none_text=”None found” order_by=”title” order=”ASC”]

In contrast to the weak performance of oil, global equities are expected to end 2023 higher. The MSCI equity index, tracking shares in 47 countries, has risen by about 20%, with investors betting on rapid-fire rate cuts from the U.S. Federal Reserve in the coming year.

In the currency market, the dollar is poised for a 2% decline in 2023 after two years of robust gains.