Oil prices to end year 10 per cent lower as demand concerns snap winning streak

Oil prices are set to end 2023 about 10 per cent lower, the first annual decline in two years, after geopolitical concerns, production cuts and global measures to rein in inflation triggered wild fluctuations in prices.

Brent crude futures were up 33 cents, or 0.4 per cent, at $77.48 a barrel at 0756 GMT on Friday, the last trading day of 2023, while the US West Texas Intermediate (WTI) crude futures were trading 20 cents, or 0.3 per cent higher, at $71.97.

On Friday, oil prices stabilised after falling 3 per cent the previous day as more shipping firms prepared to transit the Red Sea route. Major firms had stopped using Red Sea routes after Yemen’s Houthi militant group began targeting vessels.

Still, both benchmarks are on track to close at the lowest year-end levels since 2020, when the pandemic battered demand and sent prices nosediving.

Production cuts by the OPEC+ have proved insufficient to prop up prices, with the benchmarks declining nearly 20 per cent from their highest level this year.

Oil’s weak year-end performance contrasts with global equities, which are on track to end 2023 higher.

The MSCI equity index (.MIWD00000PUS), which tracks shares in 47 countries, is up about 20 per cent from the beginning of the year, as investors ramp up bets on rapid-fire rate cuts from the US Federal Reserve next year.

In the currency market, the dollar was rooted on the back foot and headed for a 2 per cent decline this year after two years of strong gains.

The expected interest rate cuts, which could reduce consumer borrowing costs in major consuming regions, and a weaker dollar, which makes oil less expensive for foreign purchasers, could boost demand in 2024, industry officials say.

A Reuters survey of 30 economists and analysts forecasts Brent crude to average $84.43 a barrel in 2024, compared with an average of around $80 a barrel this year and the highs of over $100 in 2022 after Russia’s invasion of Ukraine.