Crude oil prices are often influenced by geopolitical issues. This was the situation during Russia's invasion of Ukraine in the first part of 2022, which caused oil prices to spike above $100 per barrel that year. Time shift: in recent years, Middle Eastern violence has threatened the region that produces the majority of the world's crude oil, even as the war between Russia and Ukraine rages on. However, in contrast to 2022, crude oil prices have significantly declined, averaging over $80 per barrel in 2023 and even lower at the start of 2024. Does this imply that fuel prices in India, including those for gasoline, diesel, and CNG, would decrease as well?
Brent crude's price fluctuated from $75.89 to $79 per barrel at the beginning of 2024, and it finally ended at $78.76 per barrel on January 5th. Additionally, US WTI fluctuated in price between $70.38 and $74.24 a barrel before closing at $73.81 on Friday.
Crude oil prices ought to have soared following Hamas' invasion of Israel on October 7, which sparked a full-scale conflict between the two countries. With Israel's ground extermination of Hamas members in Gaza and the exchange of airstrikes in the Northern region, the Middle East—which contains some of the main oil producers of OPEC+, including Iraq, Iran, Kuwait, Saudi Arabia, and Bahrain—is today a hotbed of conflict. A blow to the crude supply chain was predicted from the ongoing Israel-Hamas conflict. Not only that, but oil prices also had the potential to soar as worries about trade and shipping in the Red Sea and the Bab el-Mandeb Strait intensified due to persistent, defiant strikes by Iran-backed Houthi rebels headquartered in Yemen.
The newly agreed production cuts by OPEC+ are expected to contribute to the increase in the spot price of Brent crude oil, which the EIA predicted would rise from an average of $78 per barrel (b) in December to an average of $84/b in the first half of 2024. But the EIA has downgraded our estimate for the price of Brent in 2024, even in spite of the stated reductions.
